Public Comment and Response on Proposed Final Judgment

DEPARTMENT OF JUSTICE

Antitrust Division

Public Comment and Response on Proposed Final Judgment

Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 16(b)-(h), the United States hereby publishes below the comments received on the proposed Final Judgment in

United States

v.

Mittal Steel Company

, No. 1:06-CV-1360-ESH, which were filed in the United States District Court for the District of Columbia, on February 13, 2007.

Copies of the comments and the response are available for inspection at the Department of Justice Antitrust Division, 325 Seventh Street, NW., Room 200, Washington, DC 20530, (telephone (202) 514-2481), and at the Office of the Clerk of the United States District Court for the District of Columbia, 333 Constitution Avenue, NW., Washington, DC 20001. Copies of any of these materials may be obtained upon request and payment of a copying fee.

J. Robert Kramer II,

Director of Operations Antitrust Division.

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

United States of America, Plaintiff, v. Mittal Steel Company N.V., Defendant

[Civil Action No. 1: 06CV01360-ESH]

Response of Plaintiff United States to Public Comments

Pursuant to the requirements of the Antitrust Procedures and Penalties Act, 15 U.S.C. section 16(b)-(h) (“APPA” or “Tunney Act”), the United States hereby responds to the public comments received regarding the proposed final Judgment in this case. After careful consideration of the comments, the United States continues to believe that the proposed Final Judgment will provide an effective and appropriate remedy for the antitrust violations alleged in the Complaint. The United States will move the Court for entry of the proposed Final Judgment after the public comments and this Response have been published in the

Federal Register,

pursuant to 15 U.S.C. section 16(d).

On August 1, 2006, the United States filed the Complaint in this matter alleging that the proposed acquisition of Arcelor S.A. (“Arcelor”) by defendant Mittal Steel Company N.V. (“Mittal Steel”) would violate Section 7 of the Clayton Act, 15 U.S.C. section 18. Simultaneously with the filing of the Complaint, the United States filed a proposed Final Judgment and a Hold Separate Stipulation and Order (“HSSO”) signed by plaintiff and Mittal Steel consenting to the entry of the proposed Final Judgment after compliance with the requirements of the Tunney Act, 15 U.S.C. section 16. Pursuant to those requirements, the United States filed its Competitive Impact State (“CIS”) in this Court on August 1, 2006; published the proposed Final Judgment and CIS in the

Federal Register

on August 24, 2006,

see United States

v.

Mittal Steel Company N.V.,

71 Fed. Reg. 50084, 2006 WL 2431068; and published summaries of the terms of the proposed Final Judgment and CIS, together with directions for the submission of written comments relating to the proposed Final Judgment, in

The Washington Post

for seven days beginning on September 10, 2006 and ending on September 16, 2006. The 60-day period for public comments ended on November 15, 2006, and three comments were received as described below and attached hereto.

I. The Investigation and Proposed Resolution

On January 27, 2006, Mittal Steel announced its intention to commence a tender offer to acquire control of Arcelor. At the same time, Mittal Steel announced that it would subsequently sell Arcelor's recently acquired Canadian subsidiary, Dofasco Inc. (“Dofasco”) to ThyssenKrupp A.G. (“ThyssenKrupp”) if it acquired control of Arcelor. For six months following the announcement of the tender offer, the United States Department of Justice (“Department”) conducted an extensive, detailed investigation into the competitive effects of the Mittal/Arcelor transaction. As part of this investigation, the Department obtained substantial documents and information from Mittal Steel and issued eight Civil Investigative Demands to third parties. The Department received and considered more than 45,000 pages of material. More than fifty interviews were conducted with customers, competitors, and other individuals with knowledge of the industry. The investigative staff carefully analyzed the information provided and thoroughly considered all of the issues presented. The Department considered the potential competitive effects of the transaction with respect to a number of steel products, obtaining information about these products from customers, competitors, and other knowledgeable parties. The Department concluded that the combination of Mittal Steel and Arcelor likely would lessen competition in one market—Tin Mill Products (“TMP”) sold to customers in the United States, east of the Rocky Mountains (“Eastern United States”.) TMP are finely rolled steel sheets, usually coated with a thin protective layer of tin or chrome. TMP include black plate, electrolytic tin plate (“ETP”), and tin free steel (“TFS”). Black plate is a light-guage cold-rolled bare steel sheet that serves as a substrate for production of ETP and TFS. Black plate is coated with tin to produce ETP and with chrome to produce TFS. Both ETP and TFS are used primarily in manufacturing steel cans for packaging a wide range of food products, such as soup, fruits, and vegetables, and non-food products, such as paints, aerosols, and shaving cream. For most TMP purchasers, particularly food can makers, there are no close substitutes for TMP. Packaging alternatives, such as plastic containers, are not viewed as close product substitutes. A small but significant increase in price would not likely cause sufficient TMP can customers to switch products or otherwise curtail their TMP usage so as to render the increase unprofitable.

More than 89 percent of TMP sold in the Eastern United States is manufactured by firms located either in the Eastern United States or eastern Canada. A small but significant increase in price for TMP would not cause TMP customers in the United States to substitute purchases from outside the Eastern United States in sufficient quantities to make such a price increase unprofitable. Mittal Steel, Arcelor, and Arcelor's subsidiary Dofasco sell TMP to customers in the Eastern United States.

As explained more fully in the Complaint and CIS, the acquisition of Arcelor and Dofasco by Mittal Steel would substantially increase concentration and lessen competition in the production and sale of TMP in the Eastern United States, giving the top two TMP producers, including Mittal Steel, a market share of more than 81 percent of sales. Therefore, the Department filed its Complaint alleging competitive harm in the TMP market in the Eastern United States and sought a remedy that would ensure that such harm is prevented.

The proposed Final Judgment in this case is designed to preserve competition in the production, manufacture, and sale of TMP in the Eastern United States. The proposed Final Judgment requires the divestiture of sufficient assets to prevent the increase in concentration that resulted from the combination of Mittal Steel's capacity and Arcelor's capacity to supply TMP to the Eastern United States market. The proposed Final Judgment requires the

divestiture of a significant steel mill that manufactures TMP for sale in the Eastern United States. Specifically, it directs a sale of Dofasco to ThyssenKrupp or an alternative purchaser acceptable to the United States. At the time the proposed Final Judgment was filed with the Court, Mittal Steel already had executed a letter of intent to sell Dofasco to ThyssenKrupp when and if Mittal Steel acquired Arcelor, at a price comparable to the price Arcelor itself paid to acquire Dofasco in early 2006. Dofasco, which has a history of successful operation as an independent entity, has not been integrated into Arcelor and thus remains a viable divestiture candidate.

Mittal Steel's announced plan to sell Dofasco to ThyssenKrupp upon its acquisition of Arcelor would have mitigated the increase in post-merger concentration in the Eastern United States that would have resulted from its acquisition of Arcelor. As part of an effort by Arcelor's Board of Directors to impede the tender offer, however, Arcelor sought to prevent any figure effort by Mittal Steel to divest Dofasco by transferring Arcelor's Dofasco legal title to an independent Dutch foundation, known as the Strategic Steel Stichting (“S3”). Since Mittal completed its acquisition of Arcelor, Arcelor and Mittal Steel have requested that the S3 dissolve itself so as to permit the sale of Dofasco to ThyssenKrupp. The board of the S3 nevertheless has decided not to dissolve itself.

In negotiating the proposed Final Judgment, the parties recognized that the existence of the S3 could prevent Mittal Steel from divesting Dofasco in a timely manner. For this reason, the Department determined that alternative assets, owned by Mittal Steel and not burdened with any restrictions on sale, should be designated to accomplish the intended preservation of TMP competition in the event that Mittal Steel was unable to divest Dofasco within the time allowed by the decree. The proposed Final Judgment requires Mittal Steel to divest one of two steel mills—Sparrows Point or Weirton—if, despite its best efforts to do so, it has not been able to carry out the divestiture of Dofasco within the period allowed by the decree. Sparrows Point is a fully integrated steel mill located near Baltimore, Maryland, which produces a diversified portfolio of products, including hot-rolled sheet, cold-rolled sheet, galvanized sheet, Galvalume, and TMP, for construction, steel service center, container, appliance, and other end-use markets. Weirton, located in Weirton, West Virginia, operates primarily as a TMP finishing facility, converting steel slabs obtained from Mittal's Sparrows Point and Cleveland plants.

In the Department's judgment, divestiture of Dofasco to ThyssenKrupp or another qualified purchaser would remedy the violation alleged in the Complaint because Dofasco is an integrated steel mill that has the demonstrated capacity to make significant TMP sales in the Eastern United States. In the event that Mittal fails to sell Dofasco in a timely manner due to legal impediments arising from its control by the S3 and the S3's refusal to permit its sale, the proposed Final Judgment provides that the Department will determine whether Sparrows Point or Weirton should be divested to remedy the violation alleged in the Complaint. The Department is confident that these options allow it to select an alternate facility the divestiture of which to a viable qualified purchaser would remedy the violation. Each mill currently makes substantial TMP sales in the Eastern United States, and the successful continued operation of either mill by a viable qualified purchaser would remedy the violation. The Department is currently assessing which of these two mills is most likely to continue as an on-going vigorous competitor for TMP sales in the event that Dofasco cannot be divested. Sparrows Point is an integrated facility that produces a variety of steel products in addition to TMP, and it manufactures its own steel slabs, which are the basic raw material for TMP fabrication. Weirton currently operates as a TMP finishing facility that converts slabs obtained from Mittal Steel's Sparrows Point and Cleveland mills. Mittal recently idled Weirton's slab-making facilities because they were considered to be less efficient than other slab manufacturing locations within the Mittal Steel organization, and the Department is assessing whether those facilities could be reactivated to produce slabs at Weirton on a cost-effective basis in the event of Weirton's divestiture. Even if the Department concludes that cost-effective slab production at Weirton is not likely to be feasible, there still may be sources from which Weirton could obtain slabs with a degree of consistency and reliability, and at a cost that would enable it to compete successfully as an independent supplier of TMP to the Eastern United States market. The Department will consider the availability of slabs to Weirton and other relevant considerations in determining whether Sparrows Point or Weirton should be divested to remedy the violation alleged in the Complaint, and it will select the mill that is most likely to continue to compete successfully for TMP sales in the Eastern United States following its divestiture by Mittal Steel. The proposed Final Judgment would permit this process to go forward if Dofasco cannot be sold in a timely manner. Although entry of the proposed Final Judgment would terminate this action, the Court would retain jurisdiction to construe, modify, or enforce the provisions of the proposed Final Judgment and punish violations thereof.

1

1

The merger closed on August 1, 2006. In keeping with the United States's standard practice, neither the HSSO nor the proposed Final Judgment prohibited closing the merger. See ABA Section of Antitrust Law, Antitrust Law Developments 387 (5th ed. 2002) (noting that “[t]he Federal Trade Commission (as well as the Department of Justice) generally will permit the underlying transaction to close during the notice and comment period”). Such a prohibition could interfere with many time-sensitive deals and prevent or delay the realization of substantial efficiencies. In consent decrees requiring divestitures, it is also standard practice to include a “preservation of assets” clause in the decree and to file a stipulation to ensure that the assets to be divested remain competitively viable. That practice was followed here. Proposed Final Judgment § VIII. In addition, the HSSO has been filed and entered by the Court in this case. That Order requires Mittal Steel to preserve Weirton and Sparrows Point and to hold separate Dofasco, pending the divestiture contemplated by the proposed Final Judgment.

II. Summary of Public Comments and Responses

During the 60-day public comment period, the United States received comments from Silgan Containers Corporation (“Silgan”), ThyssenKrupp, and DaimlerCyrysler Corporation (“DaimlerChrysler”). Upon review, the United States believes that nothing in the comments warrants a change in the proposed Final Judgment or is sufficient to suggest that the proposed Final Judgment is not in the public interest. The comments include concerns relating to whether the proposed Final Judgment adequately remedies the harms alleged in the Complaint. The United States addresses these concerns below and explains how the remedy is appropriate.

A. Public Comment Submitted by Silgan

1. Summary of Silgan's Comment

Silgan, the largest food can producer and the largest consumer of TMP in the United Stats, submitted a 42-page comment with 44 attachments (attached hereto as Exhibit 1). Silgan's submission asserts that only the divestiture of Dofasco has any prospect for success, and that neither the divestiture of Weirton nor the divestiture of Sparrows Point will be effective.

Silgan's comments may be summarized in three points. First, Silgan argues that Weirton cannot long survive as an independent producer of TMP, because it cannot produce slabs—the essential TMP substrate—at a competitive cost and cannot obtain slabs from elsewhere at a competitive cost. Thus, Weirton should not be divested.

Second, Silgan further asserts that, although Sparrows Point is capable of surviving as a stand-along producer of TMP, it currently provides 45 percent of the slabs used by Weirton. If Sparrows Point is divested, Weirton will be separated from a significant portion of its supply of slabs and will be unable to obtain a sufficient number of slabs from other sources. Thus, if Sparrows Point is divested, Weirton may cease TMP production even if it is kept in the Mittal Steel group.

Finally, Silgan concludes that since divestiture of either Weirton or Sparrows Point likely will lead to the demise of Weirton as a TMP producer, neither Mittal Steel mill should be divested. Instead, Silgan argues that Dofasco should be divested even if accomplishing that objective must await the expiration of the S3, and that the Final Judgment should be modified to extend the period for divesting Dofasco by several years. This would require that the stipulated HSSo, under which Dofasco now is operating, be modified to extend for the entire duration of the S3.

2

2

Silgan assets in its comment that the S3 has a 5-year term. Although the actual term of the S3 is not public information, it is many times longer than the period the proposed Final Judgment gives Mittal Steel to effect the divestiture of one of the three mills.

2. Response of United States to Silgan's Comment

The United States has carefully considered Silgan's concern that Weirton will go out of business if the United States chooses Weirton or Sparrows Point as an alternative divestiture, but disagrees.

Silgan's conclusion rests crucially on an assumption that slabs suitable for use in TMP production would be readily or economically available to Weirton from sources other than Sparrows Point. The United States agrees that the supply of slabs is an important issue, but the concerns raised by Silgan are overstated. If Sparrows Point is divested, and Weirton remains part of Mittal Steel, for example, there would be no concern about the availability to the divested mill. Sparrows Point is a fully integrated steel mill that does not depend on other Mittal Steel facilities for significant operational resources or supplies and indeed, in recent years has produced more slabs than it consumes. With respect to Wierton, even if the new owner of Sparrows Point refused to sell slabs on reasonable terms to Mittal Steel for use at Weirton, Mittal Steel would still own even blast furnaces in North America, five of which are now operating, giving it ample ability to supply Wierton with slabs. Further, Mittal could obtain additional slabs for Weirton on the open market. If Weirton were divested from Mittal and sought to acquire all of its slabs from other sources, the supply of slabs would be somewhat less certain, but there is some indication that Weirton could obtain sufficient slabs, including from imports. Dofasco, as Silgan points out, obtains about 750,000 tons of slabs per year from other firms, 400,000 tons of which comes from CST in Brazil. Some of those slabs are used to make tin mill products. The fact that Dofasco itself successfully imports a significant volume of tin-quality slabs suggests that an independent Weirton might have sufficient alternative sources for such slabs. The Department continues to investigate the likelihood that a divested Weirton would be able to manufacturer or purchase tin-quality slabs on a cost-efficient basis. If the Department concludes for any reason that the lack of certainty regarding Weirton's viability makes divestiture of Sparrows Point preferable, the Final Judgment permits the Department to direct Mittal Steel to divest Sparrows Point.

Silgan proposes that, in lieu of diverting Weirton or Sparrows Point, the proposed Final Judgment be amended to provide that Dofasco be held separate for five years, which Silgan asserts is the duration of the S3, after which it could and should be sold.

3

This proposal presents significant problems. To ensure Dofasco's operation separately from Mittal Steel for such an extended period of time would be difficult, if not impossible. Moreover, under the HSSO, ordinary and customary business decisions that would be made promptly by an independent entity cannot be made by Dofasco without certain notices and approvals and, in some circumstances, Court permission. This situation is tolerable as a temporary solution to effectuate a prompt divestiture and to limit interference or collusion pending that divestiture. As a long-term operating arrangement, however, it could adversely affect the ability of Dofasco to operate efficiently. Given that a prompt remedy is in the public interest and that the Final Judgment provides a mechanism by which the Department can assure that adequate and viable Mittal Steel assets are divested, there is no reason to require the extraordinary and unprecedented imposition of a long-term HSSO.

3

The Department understands that Silgan's objective would require an extension only for the duration of the S3, but Silgan is correct that this would require an extension of multiple years.

B. Public Comment Submitted by ThyssenKrupp

1. Summary of ThyssenKrupp's Comment

ThyssenKrupp is a large German steel manufacturer that has an agreement in principle with Mittal Steel to purchase Dofasco. ThyssenKrupp currently exports TMP to customers in the United States. In its comment, attached hereto as Exhibit 2, ThyssenKrupp states that only the divestiture of Dofasco will adequately remedy the alleged anticompetitive effects set forth in the Complaint and that divestiture of Weirton or Sparrows Point cannot remedy those anticompetitive effects. ThyssenKrupp asserts that the proposed Final Judgment and CIS “make clear that divestiture of Dofasco to ThyssenKrupp is the preferred remedy for the competitive harm alleged to arise from Mittal [Steel]'s acquisition of Arcelor[.]” Ex. 2, ThyssenKrupp Comment at 3. ThyssenKrupp's comment, however, does not address the question of what should be done if Dofasco cannot be divested due to the existence of the S3. ThyssenKrupp claims that neither Weirton nor Sparrows Point has sufficiently modern and efficient facilities to compete in the TMP market in a manner that would replace competition lost as a result of the challenged acquisition. In this respect, ThyssenKrupp's comments mirror those of Silgan.

2. Response of United States to ThyssenKrupp's Comment

The response of the United States to the Silgan Comment is equally applicable to the comments made by ThyssenKrupp. In sum, for the reasons given in Part II.A.2 above, the United States believes that the Final Judgment provides a mechanism to ensure that assets sufficient to remedy the violation alleged in the Complaint will be divested.

Notwithstanding ThyssenKrupp's evaluation of the equipment and facilities at Weirton and Sparrows Point, the Weirton and Sparrows Point assets have proved adequate consistently to supply large quantities of TMP to the Eastern United States market. In 2005, Weirton and Sparrows Point sold more

TMP in the Eastern United States than Arcelor and Dofasco combined. While capacity to manufacture TMP for sale in the Eastern United States is not the only factor, it is certainly a highly relevant factor in assessing the competitive significance of mill assets. In determining which alternate mill should be divested pursuant to the Final Judgment, the Department will focus on questions relating to the relative ability of Sparrows Point and Weirton to operate independently of Mittal Steel as future suppliers of TMP to the Eastern United States market. The fact that both mills have successfully supplied substantial quantities of TMP to the market with their current equipment supports the conclusion that the alternate mill that the United States selects to be divested would accomplish the objectives of the Final Judgment.

As to ThyssenKrupp's statement that divestiture of Dofasco is the “preferred” remedy, we agree. As discussed above, Dofasco is an attractive divestiture candidate for a number of reasons, and the proposed Final Judgment requires Mittal Steel in the first instance to use its best efforts to divest Dofasco. However, nothing in the proposed Final Judgment or the Competitive Impact Statement indicates that Dofasco is the

only

suitable divestiture candidate. Both Mittal Steel and the Department realized that Mittal Steel might be unable to accomplish the divestiture of Dofasco in a timely manner because the S3 might prevent its sale. Accordingly, the parties crafted alternative relief—the divestiture of Sparrows Point or Weirton—that also would preserve competition. Although the United States is satisfied that divestiture of Dofasco would remedy the violation alleged in the Complaint, if Dofasco cannot be sold within the period prescribed by the proposed Final Judgment, the United States will decide which of the two alternatives should be divested.

C. Public Comment Submitted by DaimlerChrysler

1. Summary of DaimlerChrysler's Comment

DaimlerChrysler is an automobile manufacturer in North America that sources its steel from a number of North American steel producers, including Mittal Steel and Dofasco.

See

DaimlerChrysler Comment (attached hereto as Exhibit 3). DaimlerChrysler does not use TMP in the production of automobiles and does not purchase TMP. It does, however, use another type of flat steel product called hot dipped galvanized steel, which it buys from Mittal Steel and Dofasco, and DaimlerChrysler claims that the proposed acquisition will adversely affect competition for that product. DaimlerChrysler asserts that consolidation in the steel industry since 2001 has reduced the number of North American manufacturers of hot dipped galvanized steel from nine to five, and that after the acquisition of Dofasco, Mittal Steel will have approximately 47 percent of North American capacity for this product. DaimlerChrysler also states that there are no adequate substitutes for this product, and that foreign producers are not suitable suppliers. DaimlerChrysler asserts that the alleged harm to competition would be alleviated if Mittal Steel were required to divest Dofasco, but that the divestiture of either Sparrows Point or Weirton would not remedy the harm because neither facility produces hot dipped galvanized steel suitable for automotive purposes.

Although DaimlerChyrsler has no direct interest in the TMP market, the company nevertheless asserts that the divestiture of Weirton or Sparrows Point will not restore competition in TMP because neither facility is capable of operating as a stand-alone facility. DaimlerChrysler cites past financial troubles of Weirton when it was a stand-alone company and Sparrows Point when it was operated by the former Bethlehem Steel Company. DaimlerChrysler asserts that either alternative facility is likely to close after divestiture. The result, according to DaimlerChrysler, would be less competition in the market for TMP.

2. Response of United States to DaimlerChrysler's Comment

DaimlerChrysler's principal argument is that the United States' focus on TMP is misplaced, and that the United States should also have alleged harm to competition for hot dipped galvanized steel. During its investigation, the United States carefully and thoroughly reviewed the competitive implications of Mittal Steel's acquisition of Arcelor (and Dofasco) for a number of different potential relevant geographic and product markets, including hot dipped galvanized products. Upon completion of its review, the United States determined that it should allege a violation and seek relief only with regard to sales to TMP in the Eastern United States, and the Complaint filed in this case reflects that determination. The decision regarding the filing of a complaint as to any particular market lies within the prosecutorial discretion of the United States.

With respect to the market for TMP, the United States disagree with the DaimlerChrysler comments relating to the adequacy of a divestiture of either of the alternative assets. As discussed more thoroughly above, the United States has considered the capabilities and economic viability of each of the alternative facilities and is confident that these options allow it to select an alternate facility the divestiture of which to a viable qualified purchaser would be sufficient to restore competition to the market for the sale of TMP in the Eastern United States.

III. Conclusion

The issues raised in the public comments were among the many considered during the United States' extensive and through investigation. The United States has determined that the proposed Final Judgment as drafted provides an effective and appropriate remedy for the antitrust violations alleged in the Complaint, and is therefore in the public interest. The United States will move this Court to enter the proposed Final Judgment after the comments and response are published.

Dated: February 13, 2007.

Respectfully submitted,

Lowell R. Stern (D.C. Bar #440487),

Attorney, United States Department of Justice, Antitrust Division, Litigation II Section, 1401 H Street, NW., Suite 3000, Washington, DC 20530, Telephone: (202) 307-0924, Facsimile: (202) 307-6283.

Certificate of Service

I hereby certify that on the 13th day of February, 2007, I caused a copy of the foregoing Plaintiff United States's Response to Public Comments to be mailed, by U.S. mail, postage prepaid, to the attorneys listed below and I caused the attachments thereto to be delivered by electronic transmission to the attorneys listed below:

Lowell R. Stern,

For Mittal Steel Company N.V.:

Mark Leddy, Esquire; Brian Byrne, Esquire; Jeremy J. Calsyn, Esquire; Cleary Gottlieb Steen & Hamilton LLP., 2000 Pennsylvania Avenue, NW., Washington, DC 20006.

For Arcelor S.A.:

John M. Nannes, Esquire; Michael V. Sosso, Esquire; Skadden, Arps, Slate, Meagher & Flom LLP., 1440 New York Avenue, NW., Washington, DC 20005.

For Silgan Containers Corporation:

Daniel L. Porter, Esquire; Vinson & Elkins LLP., 1455 Pennsylvania Avenue, NW., Suite 600, Washington, DC 20004-10009.

For ThyssenKrupp A.G.:

Steven K. Bernstein, Esquire; James F. Lerner, Esquire; Weil, Gotshal & Manges LLP., 767 Fifth Avenue, New York, NY 10153-0119.

A. Paul Victor, Esquire; Dewey Ballantine LLP., 1301 Avenue of the Americas, New York, NY 10019-6092.

For DaimlerChyrsler Corporation:

Thomas B. Leary, Esquire; Janet L. McDavid, Esquire; Hogan & Hartson LLP., Columbia Square, 555 Thirteenth Square, NW., Washington, DC 20004.

Exhibit 1

Willkie Farr and Gallagher LLP

Theodore Case Whitehouse, 202 303 1118,

whitehouse@willkie.com,

1875 K Street, NW., Washington, DC 20006-1238, Tel: 202 303 1000, Fax: 202 303 2000.

23 October 2005

By Hand Delivery

Maribeth Petrizzi, Esq., Chief, Litigation II Section, Antitrust Division, U.S. Department of Justice, Suite 3000, 1401 H Street, NW., Washington, DC 20530

Re: Comments of Silgan Containers Corp. on Proposed Consent Decree in

United States

v.

Mittal Steel Co., NV,

No. 1:06-CV-01360-ESH (D.D.C.)

Dear Ms. Petrizzi:

Transmitted with this letter, on behalf of Silgan Containers Corporation (“Silgan”) and pursuant to the Antitrust Procedures and Penalties Act (15 U.S.C. 16), are Silgan's comments on the proposed consent decree submitted by the Division to the United States District Court for the District of Columbia in August 2006.

Silgan and its counsel would be pleased to enlarge upon or explain any aspect of Silgan's comments and would be pleased to meet with you and your staff to discuss any issue or concern relating to this matter.

Sincerely,

Theodore Case Whitehouse

cc (w/encl.): Kerrie J. Freeborn, Esq.

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

United States of America, Plaintiff, v. Mittal Steel Company N.V., Defendant

[Civil Action No. 1: 06CV01360-ESH]

Comments of Silgan Containers Corporation on the Proposed Final Judgment and Competitive Impact Statement Regarding Competition in the Tin Mill Products Market

Willkie Farr and Gallagher LLP., 1875 K Street, NW., Washington, DC 20006-1238, (202) 303-1000.

Thomas Prusa, Ph.D., Professor of Economics, Rutgers University, New Brunswick, New Jersey.

October 23, 2006

Table of Contents

Introduction and Summary of Comments

I. Divestiture of Dofasco is the Best Option

A. Dofasco Has a Proven Track Record of Operating as a Highly Profitable, Independent Company

B. Dofasco Is Far Better Suited To Operate as a Stand-Alone Facility Than Either Weirton or Sparrows Point

C. Dofasco Is More Committee To Investing in the Future of the Tin Mill Steel Market

D. The Decree Should Be Amended if Necessary To Require Divestiture of Dofasco on the Earliest Date on Which It May Legally Be Divested Free of the Stichting Arrangements, and the Hold-Separate Order Should Continue in Effect Until That Divestiture Is Accomplished

II. A Stand-Alone Weirton Operation Will Fail in the Immediate Future and Undermine the Departments Objective of Preserving Competition in the Market

A. Weirton's Ironmaking and Steelmaking Assets Are Not Competitive

1. Weirton Has Small, Inefficient Blast Furnaces

2. Weirton's Steelmaking Operations Are Also Antiquated and High Cost

3. An Independent Weirton Operating Its Ironmaking Facilities Would Lack Any Captive Raw Material Supplies

4. Weirton's Geographic Location Guarantees Higher Costs for Basic Inputs

5. Weirton's Limitations as a Fully-Integrated Steel Maker Producing Tin Mill Steel Are Recognized by Mittal and Outside Observers

B. Prospects for a Stand-Alone Weirton Enterprise Operating as a Rolling and Finishing Operation Are Limited

1. Weirton's Rolling and Finishing Assets Require Substantial Investment To Be Competitive

2. Weirton Would Be Committed To Producing Primarily Tin Mill Steel, Limiting Production Flexibility

3. Weirton Would Have Difficulty Securing the Quality and Volume of Slab Necessary To Maintain Its Operations

4. Even if a Stand-Alone Weirton Rolling and Finishing Operation Found a Consistent Source of Slab Supply, the Market Dynamics for Tin Mill Steel Would Limit Profitability

5. A Stand-Alone Weirton Enterprise Running Only Its Tin Line Would Have Difficulty Securing Sufficient Volumes of Black Plate

C. There Are No Legitimate Suitors for Weirton

D. Divesting Weirton Will Have an Adverse Impact on Competition

III. A Divestiture of Sparrow's Point Would Also be a Far Less Effective Remedy Than Divesting Dofasco

A. Divestiture of Sparrows Point Is Unlikely To Enhance Competition Over the Long Term

1. Dofasco Is an Unlikely Replacement for Sparrows Point in Supplying Slabs to Weirton

2. It Is Unlikely That Mittal Steel's Other North American Slab Producers Will Divert Scarce Feedstock to Weirton

3. It Would Make no Economic Sense for Mittal's Brazilian Affiliate CST To Supply Slabs to Weirton

B. Divesting Sparrows Point Will Have an Adverse Impact on Competition in the Medium to Long Term

Conclusion

Introduction and Summary of Comments

Silgan Containers Corporation, the largest U.S. food can producer and single largest consumer of tin mill steel products in the United States, hereby provides comments on the proposed final judgment in

United States

v.

Mittal Steel Company,

the civil action concerning the effects of Mittal Steel's acquisition of Arcelor in the tin mill steel market in the Eastern United States. These comments are submitted in response to the invitation of the Antitrust Division of the United States Justice Department set forth in the August 24, 2006 edition of the

Federal Register.

Silgan appreciates the opportunity to submit comments.

Silgan wholeheartedly agrees with the Department's conclusions that (1) Mittal Steel's acquisition of Arcelor “further consolida[tes] an already highly concentrated market” and (2) “the likely effect of this acquisition would be to lessen competition substantially” among suppliers of tin mill steel products in the Eastern United States, and (3) “this loss of competition would likely result in higher prices, lower quality, less innovation and less favorable delivery terms to customers” of tin mill steel.

1

Silgan submits that such conclusions are amply supported by the evidence.

1

See

United States

v.

Mittal Steel Company,

Proposed Final Judgment and Competitive Impact Statement, 71 Fed. Reg. 50084, 50085, 50093 (August 24, 2006) (Attachment 1).

The proposed decree provides for two alternative divestiture scenarios. The first is to require divestiture by Mittal of Dofasco, a Canadian integrated steel producer. The alternative remedy, to be available only if Mittal is “unable” despite “best efforts” to accomplish the divestiture of Dofasco, would be divestiture of either the Sparrows Point integrated steel operation or the Weirton steel mill operation (which includes only a rolling mill capability at this time). Silgan wholeheartedly agrees with the Department that the preferred remedy to address this lessening of competition in the tin mill steel market is to require the divestiture of Dofasco. Indeed, Silgan submits that a proper understanding of both the market participants and the competitive dynamics affecting the market participants demonstrates the following:

•

Weirton would not be able to survive as an independent operation.

Given its location, its old, small, and currently inoperative blast furnaces, and the limited capabilities of Weirton's rolling facilities, Weirton cannot survive as an independent producer. Neither

running Weirton's ironmaking and steelmaking operations nor purchasing slab in the merchant market would be a viable strategy. Consequently, a remedy allowing the divestiture of Weirton would simply cause substantial tin mill steel capacity to exit the market, which would make the available tin mill steel supply even more concentrated.

•

No existing integrated steel mill has a serious interest in acquiring Weirton, because it makes no economic sense.

Weirton's only realistic hope of surviving is to operate as one facility within a large, diversified enterprise capable of supplying Weirton with key inputs and averaging costs across a larger production base. Weirton currently enjoys that status as part of Mittal. No viable alternative integrated steel mill is likely to come forward to replace Mittal.

•

Although Sparrows Point Is a Superior Mill to Weirton, It Is Uncertain Whether Divesting Sparrows Point Would Preserve Competition Over the Mid- to Long-Term

.

Within the Mittal system, Sparrows Point is a key supplier of slab for Weirton. A Sparrows Point facility operating outside the Mittal system would eliminate a guaranteed supply of this key feedstock to Weirton and thereby threaten the ongoing viability of Weirton. Without Sparrows Point's slab capacity, the likelihood that Mittal will ration Weirton's slab supply is greatly increased because Weirton will not be the best use of Mittal's limited slab supply in the Midwest that can be used in more profitable operations. Such fact is evidenced by the statements of Mittal Steel officials that Weirton is the least desirable facility among Mittal Steel's North American operations. In short, divesting Sparrows Point would almost certainly lead to Weirton's demise even within the Mittal enterprise, thereby diminishing overall capacity to the detriment of consumers and frustrating the goal of the decree.

In the pages below, Silgan discusses and documents these factual conclusions in considerable detail. Silgan submits that these factual conclusions require the Department to adopt the following approach in designing an appropriate remedy to address the reduced competition in the tin mill steel market. First, the Department should make every effort to accomplish the divestiture of Dofasco. Press reports immediately after publication of the consent decree suggest a lack of interest by Mittal-Arcelor of seriously pursuing divesting Dofasco. The Department needs to push Mittal-Arcelor to accomplish the divestiture of Dofasco.

Second, if immediate divestiture is not possible, Silgan strongly recommends the consent decree be modified to wait the five years reportedly necessary to eliminate any existing legal impediments to the divestiture of Dofasco. An independent Dofasco in five years is better than any of the other alternatives for preserving competition. A long run solution to the issue is better than a short term fix.

Silgan makes this recommendation because the other options under consideration—divesting Weirton or divesting Sparrows Point—will not accomplish the Department's objective of enhancing competition in the tin mill steel market. These other options will only protect competition if one believes that Weirton has better than a 64% chance of surviving over the next two or three years, either outside or within the Mittal enterprise. However, no knowledgeable industry observer would give Weirton better than a 10-20% chance of surviving if either Weirton or Sparrows Point is divested. Therefore, the only appropriate remedy is to divest Dofasco as soon as possible, even if this means waiting for the alleged legal impediments to such a divestiture to expire.

To summarize:

• Divestiture of Dofasco is the most pro-competitive outcome.

• If divestiture of Dofasco is not possible now (because of the stichting arrangements reportedly engineered by Arcelor), the second best option is continued independent operation of Dofasco for the life of the trust, (reportedly 5 years) followed by divestiture to a firm not a U.S. tin-mill producer.

• A less desirable but feasible outcome would be divestiture of Sparrows Point to a firm not a U.S. tin-mill producer (with appropriate assurance that Sparrows Point's tin-mill activity will be continued).

• Divestiture of Weirton under any scenario would be counterproductive from a competition perspective and would hurt the market because Weirton would not survive and its capacity would be permanently lost.

I. Divestiture of Dofasco Is the Best Option

A combined Mittal-Arcelor would have three tin mill steel production facilities supplying the Eastern United States market, resulting in an excessively concentrated supply situation. To remedy that undesirable outcome, the Department has determined that Dofasco should be divested.

2

The Department is correct in that determination: Divesting Dofasco remains the preferred remedy to address the loss of competition in the tin mill steel market resulting from the Mittal-Arcelor merger.

2

Id.

In assessing divestiture options the Department must consider whether the divested firm can operate independently and serve the changing needs of consumers. Any divested tin mill steel entity must be viable on its own, making Dofasco the most logical choice for divestiture.

A. Dofasco Has a Proven Track Record of Operating as a Highly Profitable, Independent Company

In sharp contrast to Weirton or Sparrows Point (both of which are discussed below), Dofasco is recognized as one of the best steel mills in the world. A leading steel consultancy and benchmarking firm, World Steel Dynamics (“WSD”), ranked Dofasco in the Top 25 of all global steelmakers. The same assessment ranked Dofasco the highest of all North American producers.

3

Dofasco scored a remarkable 9 out of 10 in the WSD analysis for profitability over the 2000-04 period.

4

3

World Steel Dynamics (2005) (Attachment 2).

4

Id.

The WSD analysis, which covers the period through June 2005, presents an independent, expert assessment of Dofasco prior to its acquisition by Arcelor, when the facility stood as a fully independent entity. Dofasco's performance during that period provides a strong indication of its likely performance if separated from Mittal.

B. Dofasco Is Far Better Suited To Operate as a Stand-Alone Facility Than Either Weirton or Sparrows Point

Compared to either Weirton or Sparrows Point, Dofasco is far better suited to survive and thrive as a stand-alone facility. Four differences stand out: (1) Dofasco has a much deeper product line, (2) Dofasco has a larger scale operation, (3) Dofasco owns its own raw materials, and (4) Dofasco has much more cold-rolled capacity to feed its tin mill steel production. Silgan discusses these below.

First, Dofasco has production capability that covers the full spectrum of flat-rolled products, from hot-rolled steel to cold-rolled and galvanized, as well as tin mill steel. Dofasco also produces tubular products in operations that consume the hot-rolled and cold-rolled steel it produces. Indeed, Dofasco Tubular Products is the largest and most diversified producer of tubular products in North America.

5

Finally, Dofasco is a significant player in the high margin auto sheet market, in which there are

few significant North American suppliers.

6

5

See

http://www.dofascotube.com/Default.htm

(Attachment 3).

6

The leading North American suppliers are Mittal (non-Sparrows Point production), U.S. Steel, AK Steel and Dofasco. See Peter Marsh, Massive Bids on Table as Giants Fight for Dofasco, Financial Times (January 13, 2006) (Attachment 4). According to long-time steel analyst Charles Bradford, Sparrows Point “doesn't have those (automotive) grades.” Scott Robertson, Mittal Sparrows Point Mill May Be On Auction Block, American Metal Market (June 2, 2006) (Attachment 5).

This breadth of production capability allows Dofasco to remain viable even if the tin mill steel market turns down. Neither Weirton nor Sparrows Point has the same breadth of production. Weirton's product line is quite limited. Indeed, Silgan's understanding is that the vast majority of Weirton's total steel production is just tin mill steel. Sparrows Point is not much better. Other than tin mill steel, Sparrows Point predominantly focuses on commodity grades of cold-rolled and galvanized flat-rolled steel.

Second, Dofasco is also a larger scale operation, with just over 4 million of tons of steelmaking capacity compared to 3.4 million tons at Sparrows Point and zero operating steelmaking capacity at Weirton. Dofasco also has larger rolling assets, with 4.9 million tons of hot strip capacity available compared to 3 million tons at Sparrows Point and 3.8 million tons at Weirton.

7

This larger scale allows Dofasco to operate more efficiently and profitably than either Weirton or Sparrows Point.

7

See generally 2005 Directory of Iron and Steel Plants, Association for Iron and Steel Technology (2005) (Attachment 6).

Third, Dofasco has access to captive supplies of both coke and iron ore, reducing its exposure to price volatility in raw material markets. Neither Weirton nor Sparrows Point has any such assets. Like the larger scale, these captive supplies of key feedstock allow Dofasco to operate more cost effectively and profitably than Weirton or Sparrows Point.

Finally, as detailed in the chart below, Dofasco has a much more favorable ratio of tin mill steel capacity to cold-rolled capacity.

Figure 1.—Ratio of Tin Mill Capacity to Cold-Rolled Capacity

Dofasco

Sparrows Point

Weirton

Cold-Rolled Capacity (000 tons)

3100

1580

1000

Tin steel production (000 tons)

418

828

800

Fraction of tin mill capacity to cold-rolled

13.5%

52.4%

80%

The ratio of tin mill capacity to cold-rolled capacity at Dofasco is just 13.5 percent. In contrast, the ratio of tin mill steel capacity to cold-rolled capacity at Sparrows Point is greater than 50%, and is roughly 80% at Weirton. Dofasco's more limited tin mill steel capacity relative to its cold-rolled capacity means a much larger portion of its cold-rolled capacity is immediately available for sale in often more profitable cold-rolled or galvanized markets. Weirton and Sparrows Point, on the other hand, have limited opportunity to serve cold-rolled and galvanized markets while at the same time keeping their more substantial tin mill steel lines operating at efficient capacity utilization rates.

C. Dofasco Is More Committed to Investing in the Future of the Tin Mill Steel Market

A key factor for the Department's consideration should be which entity will support the tin mill steel market for the long term. It is Silgan's opinion that Mittal is not interested in this product and will not support the tin mill steel market, whereas Dofasco has demonstrated a concrete willingness to support the product.

Prior to its acquisition of International Steel Group, Mittal had no significant involvement in the tinplate market from any of its worldwide operations. With ISG, Mittal acquired the former Bethlehem Steel tinplate operations at Sparrows Point, MD and the former Weirton Steel tinplate operations in Weirton, WV. Since the acquisition of ISG, these operations have been scaled back, not expanded, and Mittal has shown little or no interest in their long-term viability. As importantly, since its acquisition of ISG, Mittal has met is contractual volume commitment to Silgan, but has declined to ship additional volumes requested by Silgan. Efforts to engage Mittal in discussions toward extending the current supply commitment to Silgan have not been successful.

The experience with Dofasco has been much different. Time and again Dofasco has demonstrated a willingness to commit to the long term production and supply of tin mill steel. For example, Dofasco understood the desire of can companies for wider and wider coils to enhance can making productivity. Dofasco, unlike other suppliers, decided to invest in additional wide coil capacity, and now is one of the few suppliers in the world to offer extra-wide coils. Another example is Dofasco's willingness to talk about and agree to longer-term supply arrangements. There is no question that producing tin mill steel is in Dofasco's long term plans.

D. The Decree Should Be Amended if Necessary To Require Divestiture of Dofasco on the Earliest Date on Which It May Legally Be Divested Free of the Stichting Arrangements, and the Hold-Separate Order Should Continue in Effect Until That Divestituture Is Accomplished

Because of the obvious superiority, from the standpoint of competitive supply of tin mill steel products, of a divstiture of Dofasco over either alternative divestiture contemplated by the proposed decree, the Decree should be amended to ensure that Dofasco is divested and that any short-term impediment to that divestiture arising from the

stichting

arrangements erected by Arcelor to frustrate Mittal's efforts to acquire Arcelor does not wind up producing long-term harm to the tin mill steel market in the Eastern United States. Dofasco's long history of successful operation as a stand-alone entity and its modern plant and facilities make it highly likely that Dofasco could exist and prosper under the hold-separate order now in place for at least five years and remain a viable and attractive divestiture candidate at the end of that period. Thus, there is no reason for the Department or the Court to accept the plainly less effective—and potentially counterproductive—alternatives of divesting either Sparrows Point or Weirton.

II. A Stand-Alone Weirton Operation Will Fail in the Immediate Future and Undermine the Department's Objective of Preserving Competition in the Market

There is no viable business model for a stand-alone Weirton operation that ensures even the intermediate term survival of the company. As a fully-integrated steel producer making raw steel through to tin mill products (“tin mill steel”), Weirton is not competitive. The Weirton facility's ironmaking and steelmaking assets are antiquated and effectively unusable. Indeed, the ironmaking and steelingmaking assets are currently not operating for this very reason.

8

The lack of any captive raw material assets and the costs associated with transporting bulk raw materials such as iron ore to the Weirton site only make the prospects for restarting the ironmaking and steelmaking assets in a stand-alone configuration that much more untenable.

8

See Mark Reutter, The Strange Case of Weirton Steel, MakingSteel.Com (April 25, 2006) (emphasis aded) (Attachment 7).

As a finishing operation consuming either slab or more advanced downstream inputs (

i.e.,

hot-rolled band or black plate), it is also highly doubtful that Weirton would survive as a stand-alone entity. First, the proposition that a stand-alone Weirton operation would have access to the quality or volume of steel inputs at the cost necessary to run the facility efficiently is highly speculative. Second, limitations at Weirton's rolling operations would further hinder the facility's ability to operate a flexible production base or meet the ever-increasing quality demands of tin mill steel consumers.

A. Weirton's Ironmaking and Steelmaking Assets Are Not Competitive

1. Weirton Has Small, Inefficient Blast Furnaces

It is generally agreed within the steel industry that blast furnaces with an annual production capacity of less than 1.5 million tons per year are not of efficient scale. Most, if not all, world-class blast furnaces exceed 3 million tons in annual capacity. While blast furnace size is not necessarily dispositive with respect to cost competitiveness, it is considered among the most important factors.

9

9

Other competitiveness factors one might consider include the coking rate of the furnace and any alternative charging technologies utilized by the furnace to reduce that rate and increase productivity. For a discussion of these alternative techniques, see William T. Hogan and Frank T. Koelbe, Fewer Blast Furnaces, But Higher Productivity, New Steel (November 1996) (Attachment 8). Note, however, that reliance on alternative charging techniques has presented new cost problems for some blast furnace operations. In particular, for those blast furnaces relying on natural gas injection to reduce coking rates (including Weirton), they successfully lowered their coking rates and boosted productivity, but were later hit with heavy costs as natural gas prices rose dramatically.

The U.S. Domestic steel industry's own trade association acknowledges the weaknesses and fate of small blast furnaces, as does the U.S. Department of Energy (“DOE”). According to an article posted on the American Iron and Steel Institute's web page, “[b]last furnaces will survive into the next millennium because the larger, efficient furnaces can produce hot metal at costs competitive with other iron making technologies.”

10

Similarly, a study of alternative ironmaking technologies funded by DOE concluded that “the primary problem (sic) the Blast Furnace approach is that many of these Blast furnaces are relatively small, as compared to newer larger furnaces; thus are relatively costly and inefficient to operate.”

11

10

See How a Blast Furnace Works, AISI (emphasis added) (Attachment 9).

11

Ironmaking Process Alternative Screening Study—Volume I, Summary Report, Lockwood Greene study for the Department of Energy (Oct. 2000) at 1-1 (Attachment 10).

Weirton's blast furnaces—none of which is currently in operation—are among the smallest blast furnaces in North America. Weirton's primary No. 1 furnace has a rated annual capacity of 1.46 million tons. The facility's No. 4 furnace, the only other furnace at the Weirton site in any condition to be restarted,

12

has a rated capacity of just 1 million tons.

13

By contrast, the would-be competitors of a stand-alone Weirton enterprise operate the largest blast furnaces in North America.

14

12

Weirton's No. 4 furnace needs repairs before being restarted. Weirton's former owner ISG intended to make such repairs. See Jim Leonard, ISG To Repair, Restart Second Blast Furnace at Weirton Unit, American Metal Market (July 12, 2004) (Attachment 11). With Mittal's acquisition of Weirton, it was determined that Weirton would no longer produce raw steel and the repair work was never initiated. See Mark Reutter, The Strange Case of Weirton Steel, MaingSteel.Com (April 25, 2006) (Attachment 7).

13

While age is less indicative of the efficiency of a furnace, Weirton's furnaces are very old. The No. 1 furnace was built in 1919; the No. 4 furnace was built in 1953. Through rebuilds and modifications, these furnaces have been made more efficient, but they remain high cost. Indeed, by Mittal's own admission, Silgan knows they are at least the highest cost furnaces in the Mittal USA system. See Mark Reutter, The Strange Case of Weirton Steel, MakingSteel.Com (April 25, 2006) (Attachment 7).

14

Capacity data for the Weirton blast furnaces derived from 2005 Directory of Iron and Steel Plants, Association for Iron and Steel Technology (2005) (Attachment 6). Capacity data for Mittal, Sparrows Point “L” furnace derived from Mittal Steel USA Works to Restore Furnace at Sparrows Point, PRNewswire (July 14, 2006) (Attachment 12). Capacity data on Mittal, Indiana Harbor No. 7 furnace derived from Ispat Inland Accelerates Maintenance Outages, Ispat Inland Press Release (March 7, 2005) (Attachment 13).

Figure 2.—Comparison of Blast Furnace Size

Company/operation

Blast furnace

Year built

Annual capacity

(million tons)

Mittal, Indiana Harbor

No. 7

1980

4.0

U.S. Steel, Gary Works

No. 14

1974

3.4

Mittal, Sparrows Point

“L”

1977

3.2

Weirton

No. 1

1919

1.5

Weirton

No. 4

1953

1.0

Weirton's furnace limitations have long been known; in 1982, National Steel proposed shutting down Weirton's furnaces and operating Weirton as a rolling mill.

15

15

Weirton Workers Buyout from Online NewsHour, September 23, 1983;

http://www.pbs.org/newshour/bb/business/july-dec83/steel_9-23-83.html.

(Attachment 14).

In any case, assessing the competitiveness of the Weirton blast furnaces is strictly an academic exercise. Both the Weirton No. 1 and No. 4 furnaces are no longer hot banked, but now sit completely cold. The costs of restarting the furnaces from a cold state are uncertain, but could be significant depending on any damage resulting from the cool down. Such costs may in fact be prohibitive to any would-be investor.

2. Weirton's Steelmaking Operations Are Also Antiquated and High Cost

Weighed down by the high cost of its ironmaking operations, the Weirton facility inherently is a high cost steel

producer. Leaving no doubt, Weirton's slab costs have been rated by a leading steel consultancy as the highest in the world.

16

These results are consistent with Mittal's own top-down review of the Mittal USA system, which found the Weirton steelmaking assets to be the least economical among its many U.S. facilities.

17

16

High Production Costs Hamper AK Steel's Middletown Works, Steel Business Briefing (Aug. 10, 2006) (Attachment 15).

17

See Mark Reutter, The Strange Case of Weirton Steel, MakingSteel.Com (April 25, 2006) (Attachment 7).

Weirton's continuous caster is also an old, four-strand caster.

18

A new, single strand caster is necessary to achieve better yield loss and quality control in important tin mill grades of steel.

18

2005 Directory of Iron and Steel Plants, Association for Iron and Steel Technology (2005) at 130 (Attachment 6).

3. An Independent Weirton Operating Its Ironmaking Facilities Would Lack Any Captive Raw Material Supplies

A stand-alone Weirton enterprise utilizing its ironmaking assets does not fit the paradigm of successful integrated steel makers (

i.e.

, those operating blast furnaces and basic oxygen furnaces to produce steel) operating in the U.S. market. That paradigm includes access to captive supplies of at least some raw material requirements (coal, coke, or iron ore).

Integrated steel producers consume massive amounts of raw materials in the form of coal, coke, and iron ore to run their blast furnaces. To insulate themselves from volatility in raw material markets, integrated producers tend to maintain captive supplies of at least some of their raw material needs. Although all U.S. mills have largely divested themselves of their U.S. coal assets, maintaining captive coke supplies remains a common practice among integrated producers. This practice continues given the high costs associated with building new coke plants in today's regulatory environment and the fact that the coke market tends to be in very tight supply. The largest producers also maintain captive iron ore assets.

Figure 3.—Integrated Mill Raw Material Assets

19

Company

U.S. coke

assets

U.S. iron ore

assets

U.S. Steel

Yes

Yes.

Mittal Steel

Yes

Yes.

AK Steel

Yes

No.

Wheeling-Pittsburgh Steel

Yes

No.

WCI Steel

No

No.

Severstal-Rouge Steel

Yes

No.

Sparrows Point

No

No.

Dofasco

20

Yes

Yes.

Weirton

No

No.

The Weirton

facility does

not operate coke ovens, nor does it own any iron ore assets. As a stand-alone enterprise operating its blast furnaces, Weirton's lack of raw materials assets would leave it dependent on outside supply, including supply from other U.S. tin mill steel producers.

19

See Various Annual Reports from producers listed in the above table below.

20

Dofasco has iron ore assets in Canada. See Maria Guzzo, Dofasco seals $251m purchase of Canadian iron ore miner QCM, American Metal Market (July 26, 2005) (Attachment 16).

With respect to coke, the implication of Weirton's outside supply dependency is documented in Weirton's recent past. In 2004, Weirton experienced a coke supply disruption when U.S. Steel (a tin mill steel producer) declared

force majeure

on a supply contract with Weirton in a very tight market for coke, forcing Weirton to limit operations in that year.

21

21

Scott Robertson, Force Majeure Clobbers Coke-Short Steelmakers: Weirton Eyes Options, Blast Furnace Closure, American Metal Market (Jan. 9, 2004) (Attachment 17).

Although the first new coke ovens built in the United States in seven years were completed in 2005, shipments of metallurgical coal to U.S. coke plants show a decline over the last 5 years due to the tight specifications needed for coal to produce coke.

22

Key sources of imported coke, such as China, now consume a larger portion of that supply in their own domestic markets.

23

With a tight world market for metallurgical coal coupled with U.S. supply disruptions that occurred in 2005, the average delivered price of coal to U.S. coke plants increased by 36.2 percent to reach an average price of $83.79 per short ton in 2005. This, in turn, caused coke prices to skyrocket.

24

22

U.S. Coal Supply and Demand: 2005 Review, Department of Energy, Energy Information Administration.

23

For a discussion of the tight market for coke during 2004 and the factors that drive tight coke supplies, see Peter Krouse, Heat Back on Steel Makers, The Plain Dealer (February 26, 2004) (Attachment 18).

24

U.S. Coal Supply and Demand: 2005 Review, Department of Energy, Energy Information Administration.

Figure 4.—U.S. Metallurgical Coal Supply and Prices to U.S. Coke Plants

[Million short tons and nominal dollars per short ton]

2001

2002

2003

2004

2005

Consumption Average

26.1

23.7

24.2

23.7

23.4

Delivered Price

$46.42

$50.67

$50.63

$61.50

$83.79

Even Weirton's union representatives acknowledge the coke problem: “Union spokesman David Gosset said raw materials are the root of Weirton's problem. Weirton does not have a coke plant and must buy it at a high cost on the open market.”

25

25

Vicki Smith, Furnace Will Stay Idle at Weirton Steel Mill, Associated Press (Dec. 2, 2005) (Attachment 19).

The raw material paradigm bears out in the experience of other integrated steel producers. Operations with no captive supplies are vulnerable and tend to have poorer operating performance. WCI Steel, for example, also retains no raw material assets. Not surprisingly, like Weirton, it was also the victim of the coke supply disruption that occurred in 2004.

26

WCI emerged from nearly three years of bankruptcy only this year.

26

See Peter Krouse, Heat Back on Steel Makers, The Plain Dealer (February 26, 2004) (Attachment 18).

4. Weirton's Geographic Location Guarantees Higher Costs for Basic Inputs

Unlike competitors along the Great Lakes and elsewhere, which have access to water transportation to bring in raw materials, Weirton must resort to more expensive truck and rail options to supply such basic bulk inputs as iron ore.

27

As a stand-alone enterprise not affiliated with a larger integrated steel operation, Weirton would have no ability to average higher transportation costs over a broader asset base or leverage lower transportation prices with service providers serving more than the Weirton facility.

27

According to the Minneapolis Federal Reserve “water transport via inland ports is estimated to be at least five times more efficient than rail and trucks at delivering similar cargo on a fuel cost-per-gallon basis. U.S. inland waterways move about 15 percent of interstate commerce for bulk commodities at only 2 percent of the cost.” Marcia Jedd, Minneapolis Federal Reserve fedgazette, January 2003,

http://minneapolisfed.org/pubs/fedgaz/03-01/shipping.cfm

(Attachment 20); See also Vicki Smith, Furnace Will Stay Idle at Weirton Steel Mill, Associated Press (Dec. 2, 2005) (Attachment 19) (“Weirton also must buy iron ore and have it shipped by rail. Mittal's mill in Cleveland can get iron ore shipped in cheaper on Lake Erie”).

5. Weirton's Limitations as a Fully-Integrated Steel Maker Producing Tin Mill Steel Are Recognized by Mittal and Outside Observers

There is no dispute that Weirton suffers from severe limitations as a fully-integrated steel producer, even among those parties with an immediate interest in, or who are otherwise knowledgeable about, the facility. Consider the comments of Mittal USA CEO Leo Schorsch shortly after Mittal acquired Weirton and made the decision to shut down its steelmaking operations:

This was a very difficult decision, since the Independent Steelworkers Union and all employees have worked so hard to beat the odds trying to maintain steelmaking at Weirton,” said Louis L. Schorsch, chief executive of Mittal Steel USA. “However, the structural disadvantages of Weirton for these processes entail costs that are too high to support competitive downstream facilities.

28

28

Mark Reutter, The Strange Case of Weirton Steel, MakingSteel.Com (April 25, 2006) (Attachment 7).

At the same time, noted industry analyst and expert on ironmaking/steelmaking assets Michael Locker stated:

The negative of the consolidation process is that you have a comparison going on of plants * * * within the Mittal family.

If they come out on the short end of the stick, they can't justify standing alone—even with all the hopes of cost reduction and efforts by the union, which were mighty.

29

29

Vicki Smith, Furnace Will Stay Idle at Weirton Steel Mill, Associated Press (Dec. 2, 2005) (emphasis added) (Attachment 19).

Other commentary from the period is consistent with that above concerning Mittal's own internal assessment of the Weirton facility:

Unknown to Weirton workers as well as to many ISU officers, Mittal Steel kept obsessive track of all financial aspects of its five integrated mills (Burns Harbor and Indiana Harbor in addition to Cleveland, Sparrows Point, and Weirton). The mills were compared and ranked according to their raw material inputs, manufacturing costs, and product profit margins. At the bottom of the list lay the “swing” plant—the facility that, in times of low demand, didn't generate enough money to please the steelmasters in London.

Weirton was the “swing” plant.

It was hobbled by higher raw material costs, especially for coke, than the other mills.

30

30

Mark Reutter, The Strange Case of Weirton Steel, MakingSteel.Com (April 25, 2006) (Attachment 7).

Based on this commentary, it is clear that Weirton, even as part of a vast integrated steel enterprise, is incapable of being competitive running its ironmaking and steelmaking assets. As an independent enterprise running those assets, prospects would only diminish from bad to worse.

B. Prospects for a Stand-Alone Weirton Enterprise Operating as a Rolling and Finishing Operation Are Limited

Even if Weirton's ironmaking and steelmaking assets remain closed and the facility continues operating as a rolling and finishing operation, the viability of such an operation on a stand-alone basis is doubtful. The Weirton rolling operations—long neglected by its previous and current owners—require substantial investment to remain competitive. Moreover, the production emphasis on tin mill steel, as well as the configuration and limitations at the mill, mean that it would have limited production flexibility to maximize profitability by reacting to changes in up- and down-stream flat-rolled steel markets. Finally, the prospect of limited availability of merchant slab or black plate substrate could lead to supply disruptions and limit capacity utilization at the mill, such that it could not generate sustainable profits.

1. Weirton's Rolling and Finishing Assets Require Substantial Investment To Be Competitive

The Weirton facility, both as an independent entity and as part of the International Steel Group and Mittal Steel, has been a consistent industry laggard. Years of losses have led to years of neglect at the mill.

31

At the tin line, alone, Mittal has publicly identified the need for in-line edge-cutting and tension leveling equipment to keep the mill competitive.

32

Mittal, however, has not committed to that investment, which it identified as important shortly after it acquired the Weirton assets from the International Steel Group.

33

31

Weirton filed for Chapter 11 Bankruptcy protection in May 2003 after racking up more than $700 million in losses over the previous five years. Vicki Smith, Weirton Files for Ch. 11; 1,100 Ohio Jobs Affected, Associated Press (May 20, 2003) (Attachment 21). Such financial performance is not conducive to investment in the capital-intensive steel industry.

32

See Hearing Transcript, In the Matter Of: Tin and Chromium-Coated Steel Sheet from Japan, Inv. No. 731-TA-860 (Review) (April 27, 2006) (testimony of Bill Stephans, Division Manager for TMP at Mittal Steel USA's Weirton Facility) (Attachment 22).

33

Mark Reutter, The Strange Case of Weirton Steel, MakingSteel.Com (April 25, 2006) (Attachment 7).

Given Weirton's historically poor financial performance, it is likely that other major maintenance at the mill has been severely neglected. If Weirton has any chance at all of being a viable, stand-alone operation, any new investor would have to be committed to substantial new capital spending to improve the competitive position of the mill. The rolling and finishing lines as they currently exist are not “turn-key” operations that would be immediately competitive in today's market.

2. Weirton Would Be Committed to Producing Primarily Tin Mill Steel, Limiting Production Flexibility

In today's steel industry, few mills consistently make money producing only one product. This is particularly true for mills that maintain hot-rolled through galvanizing assets and have to cover the fixed costs associated with each stage of flat-rolled steel production. Large integrated operations such as these seek a balance, shifting production upstream and downstream to adjust to changing market conditions in each segment while also attempting

to preserve efficient capacity utilization rates at each stage of production. Weirton cannot make similar adjustments.

At the front of the flat-rolled production chain, hot-rolled steel, Weirton would lack the ability to challenge more nimble and cost competitive minimill producers that have long dominated the commodity hot-rolled market. The economics of buying slab dictate that stand-alone Weirton rolling and finishing operation move downstream to higher value-added products in order to capitalize on steel grades that minimills find more difficult to produce.

At the end of the production chain, the Weirton facility is incapable of competing in the galvanized sheet market, whether using a hot-rolled or cold-rolled substrate. Weirton's galvanizing lines were determined to be the highest cost operations in the Mittal system and closed.

34

It is difficult to conceive of a cost environment in which Weirton could reliably purchase slab and produce a sustainable profit running steel through such a high cost facility.

34

Sam Kusic, ISU Irked by Mittal Steel's Plan To Shut Weirton Galvanizing Line, American Metal Market (Feb. 3, 2006) (Attachment 23).

Finally, Weirton's cold-rolling mill, while potentially capable of producing competitive cold-rolled, would have limited capacity to do so since it is dedicated to serving the tin operations, creating constant pressure to keep the tin mill operating at efficient rates to cover costs.

3. Weirton Would Have Difficulty Securing the Quality and Volume of Slab Necessary To Maintain Its Operations

Tin mill steel is a high grade steel product that must meet strict metallurgical and physical tolerances in order to satisfy customer demands. The steelmaking and slab casting phases of production are every bit as critical to achieving these qualities as are the rolling and finishing phases. As a slab roller, it would be necessary for a stand-alone Weirton enterprise to secure tin mill steel-grade slab from as few committed sources as possible in order to control uniformity and quality. Failure to do so would lead to circumstances with which the Weirton facility is all too familiar: Unreliable, quality-deficient supply. This was the outcome in 1999, when Weirton experimented as an independent producer rolling slab acquired from other producers. Delivery and inventory management were poorly handled. Slab arrived late and in inconsistent quality and tolerances.

35

It is unlikely that the Weirton facility could achieve better results in today's market.

35

Weirton's resort to purchased slabs and the problems created by that strategy were cited in testimony during the 2000 antidumping case on TMP imports from Japan (Attachment 24).

A stand-alone Weirton Enterprise rolling purchased slab would find it difficult to secure, on an economic basis, the 800 thousand to 1 million tons of tin mill steel-grade slab necessary for its operations from high quality suppliers. In this regard, Brazil is recognized as the low-cost, high quality producer of merchant slab (

i.e.

, slab produced for sale) in the world and would be the logical supplier to the Weirton facility. However, current Brazilian merchant slab supply is largely allocated among an existing global customer base.

36

Indeed, free supplies will be further limited with CSN's anticipated acquisition of U.S. steelmaker Wheeling-Pittsburgh, which currently maintains 600,000 tons in excess hot-rolling capacity that would be filled by CSN slab.

37

That tonnage could increase substantially if a decision is made to shut Wheeling-Pittsburgh's aging blast furnace.

38

36

In 2006, Brazilian merchant slab supply became extremely tight, with prices rising to $555 a ton, as Brazilian producer CSN struggled to make up for production losses due to an accident at its No. 3 blast furnace. A looming increase in export taxes on Chinese slab put further pressure on the market as Chinese producers pulled back from export markets. See Diana Kinch, Brazil Slab hits $555/T In Tight Export Market, American Metal Market (June 5, 2006) (Attachment 25).

37

Wheeling-Pittsburgh Makes Loss, Despite Rising Market, Steel Business Briefing (May 11, 2006) (Attachment 26).

38

A competitor for the Wheeling-Pittsburgh assets, Esmark, envisions shutting down the last Wheeling-Pittsburgh blast furnace in an indication of the perceived or assessed costs of running that facility. See Esmark To Shut Wheeling-Pitt BF If Bid Succeeds, Steel Business Briefing (August 23, 2006) (Attachment 27).

While the Brazilian slab industry has committed to a substantial expansion of its slab-making capacity, there is little prospect that an economically viable volume of this forthcoming slab capacity would be available to a stand-alone Weirton in the quality required to produce tin mill steel. As documented in the following table, virtually all of the new Brazilian slab would be unavailable to Weirton. Much of the planned slab capacity expansion among Brazilian producers targets either Brazilian domestic demand or other offshore demand (

via

existing business relationships). Timing considerations make it even more improbable that Brazil can source slab for a newly-divested and independent Weirton mill: A significant fraction of Brazil's new slab capacity will ramp up years from now, an unsuitably long period of time.

Figure 5.—Brazilian Slab Capacity Expansions

Producer/project

New slab capacity

(million tons)

Expected startup

Comments

CST (Arcelor Brazil)

39

2.5

End of 2006

Expected to add 2.5 million tons of hot-rolled coil capacity by 2008, which will capture much of this expansion. Also intends to ship substantial additional tonnage to Arcelor-affiliate Dofasco, which is slab-deficient.

Gerdau Acominas SA

40

3 (initially 1.5)

Mid-2008

Discussions are already underway with “possible clients abroad.”

CSA

41

(Thyssen/CVRD)

4.4

2008

Much of this capacity is to be dedicated to Thyssen Steel's offshore operations, including a proposed U.S. greenfield mill expected to produce 4.5 million tons of finished steel.

Ceara Steel

42

(CVRD/Donguk Steel/Danieli & C. SpA)

1.5

2009

Donguk Steel is expected to consume at least 50 percent of the slab produced at the facility.

CSN/Baosteel

43

4.5

2011

Two projects are envisioned, with feasibility studies to be finalized by the end of 2006. Baosteel is a projected partner in one project, with the expectation that a portion of the production would be directed at Baosteel. Other available capacity would also serve CSN's rolling operations abroad, with the remainder available to third parties.

Usiminas/CVRD

44

5

2010-2012

Usiminas is seeking a partner among companies that already have, or plan to set up, rolling capacity abroad.

The

Russian producer Severstal is also a low-cost producer capable of meeting international quality standards and therefore might be an economical option for a stand-alone Weirton facility dedicated to rolling slab. This option, however, is limited. Severstal's acquisition of Rouge Steel limits its ability to supply high volumes of merchant slab while meeting its commitment to Rouge.

45

39

Diana Kinch, Arcelor Brasil Sets Sights on New Slab Plant, American Metal Market (May 1, 2006) (Attachment 28); Diana Kinch, CST to Hike Slab Sales to Dofasco, American Metal Market (March 22, 2006) (Attachment 29).

40

Diana Kinch, Gerdau Acominas Charging Into Slab Mart, American Metal Market (June 30, 2006) (Attachment 30).

41

Diana Kinch, CSA Steel Project Receives License, American Metal Market (July 6, 2006) (Attachment 31); Scott Robertson, North American at Top of TK's Agenda, American Metal Market (August 11, 2006) (Attachment 32).

42

Diana Kinch, Groundwork Laid For Brazil's Ceara Slab Project, American Metal Market (December 16, 2005) (Attachment 33).

43

Diana Kinch, CSN May Lift Slab Capacity of Two Projects, American Metal Market (September 1, 2006) (Attachment 34).

44

Diana Kinch, Brazil's Usiminas Casts Sights Ahead for New Slab Project Partner, American Metal Market (August 29, 2006) (Attachment 35).

45

At the time of acquisition, Severstal expressed its intent to revitalize the Rouge facility by shipping low-cost slab to Rouge from its Russian production base. See Russia's Severstal Wants to Ship More Steel to U.S., Reuters (February 2, 2004) (Attachment 36).

In short, the market situation for merchant slab would likely force a stand-alone Weirton to source tin mill steel-quality slab piecemeal from multiple sources. As Weirton's 1999 experience showed, this is precisely the sourcing situation Weirton would want to avoid since it would raise the prospect of supply disruptions and production problems related to uneven slab consistency.

4. Even if a Stand-Alone Weirton Rolling and Finishing Operation Found a Consistent Source of Slab Supply, the Market Dynamics for Tin Mill Steel Would Limit Profitability

Ultimately, even if Weirton could secure an adequate source of slab from third parties, the market dynamics for tin mill steel would create significant profitability problems as the market for flat rolled steel ebbs and flows. In the flat-rolled steel market, the relationship between slab prices and prices for mainstream flat-rolled steel—hot-rolled, cold-rolled and galvanized products—tends to remain more stable. A more consistent pricing spread is maintained as prices for slab rise and fall. A very different pattern emerges for tin mill steel, given the very small and specialized market it serves. The pricing spread between slab and tin mill steel grows or shrinks substantially as the overall market for flat-rolled steel strengthens or weakens. For a tin mill steel producer relying on merchant slab, it is more difficult to preserve profit margins as markets for hot-rolled, cold-rolled, and galvanized steel expand and cause slab prices to rise. This is evidenced in the figure below tracking prices for imported slab, as well as the U.S. market prices for hot-rolled, cold-rolled, galvanized, and tin mill steel.

46

46

Slab prices reflect average unit values for carbon steel slab imported from Brazil, tracking U.S. harmonized tariff schedule items 7207.12.0050 and 7207.20.0045. U.S. market prices for hot-rolled, cold-rolled and galvanized sheet were sourced from Steel Business Briefing and are FOB Midwest U.S. mill. U.S. market prices for TMP were sourced from Tin- and Chromium-Coated Steel Sheet from Japan, Inv. No. 731-TA-860 (Review), USITC Pub. 3860 (June 2006) at V-8 (Attachment 37).

EN09AP07.000

Figure 1 captures both the significantly depressed steel market in 2003 and the extremely strong steel market that followed in 2004 and 2005. The substantial swing in pricing for hot-rolled, cold-rolled, and galvanized sheet is in sharp contrast to the much flatter pricing trajectory of tin mill steel. Indeed, during much of 2004, the market price for commodity grade cold-rolled steel (

i.e.

, the product most similar to tin mill steel substrate) was actually higher than the tin mill steel price, despite the substantial additional value-added associated with tin mill steel production. While the visual depiction of pricing suggests tin mill steel also maintains a manageable pricing spread over time, the reality is very different. Consider that, over the 2000-2005 period, U.S. tin mill steel producers, as an industry, recorded their largest loss in 2003, when it appears from the figure above that their raw material costs would have been the most manageable.

47

47

Tin- and Chromium-Coated Steel Sheet from Japan, Inv. No. 731-TA-860 (Review), USITC Pub. 3860 (June 2006) at Table III-8 (Attachment 38).

Just as important, the additional overhead and fixed costs associated with running rolling and finishing assets from the very first stage of flat rolled steel production through to tin mill steel production means that margins from tin mill steel production become extremely tight in a strong steel market. Yet, this is precisely when tin mill steel producers would logically seek to recoup losses from weak years. This phenomenon has two important implications. First, a tin mill steel producer reliant on merchant slab is unable to capitalize on a strong market through better margins on a higher volume of steel shipped. Second, a tin mill steel producer reliant on merchant slab is at a competitive disadvantage in the acquisition of slab on the open market against other slab rollers producing traditional flat-rolled products. In particular, because of the pricing spread, these other slab rollers have greater bidding power to secure the volumes necessary for their operations. These two factors combine to produce a very difficult competitive environment for any tin mill steel producer wishing to rely exclusively on merchant slab. Weirton would not be an exception to this reality.

5. A Stand-Alone Weirton Enterprise Running Only Its Tin Line Would Have Difficulty Securing Sufficient Volumes of Black Plate

Real world experience indicates that even if a stand-alone Weirton enterprise reduced its operations to only its tin lines and sourced only the substrate for tin mill steel, black plate, it would be unable to source enough substrate to run its operations on a profitable basis. In this regard, Silgan notes that the Weirton tin lines are substantial, capable of running 800,000 tons of tin mill steel. To achieve economies of scale, it needs to operate those lines at better than 70 percent, meaning it would have to secure as much as 560,000 tons of black plate to run efficiently.

Consider, however, the experience of Ohio Coatings, a tin mill steel producer configured to finish black plate. Despite being owned by, or in close affiliation with, integrated steel producers with the capacity to produce black plate,

48

Ohio Coatings has been unable to secure more than 60 percent of its black plate requirement. This is true even though the mill is capable of producing only 300,000 tons of tin mill steel. The fact that an owner of the facility is unwilling to supply Ohio Coatings with its material requirements speaks volumes about whether a stand-alone Weirton

finishing black plate into tin mill steel, with far more substantial tin mill steel capacity, could source enough black plate as a stand-alone producer looking to the open market.

48

Ohio Coatings is a 50-50 joint venture between Wheeling-Pittsburgh Steel and Donguk Steel of Korea. Wheeling-Pittsburgh is a producer of black plate and supplies Ohio Coatings that input. Nippon Steel is Ohio Coatings's exclusive distributor, and is also a major producer of black plate.

Ohio Coatings' problem, which is the same problem a stand-alone Weirton enterprise would face if similarly operated, relates back to the flat-rolled pricing dynamics discussed in the previous section. Steelmakers must make choices regarding the products they choose to market. The decision begins at the raw steel phase, since steel chemistry will dictate what finished steel products can be made. In a strong market for hot-rolled, cold-rolled, or galvanized sheet, the incentive to produce black plate for tin mill steel production is diminished. A steelmaker will seek to maximize profitability and throughput by focusing on those products generating the strongest margins. The difference in profit margins between tin mill steel and the other traditional flat-rolled products can be so great that there is no economic justification for producing black plate. The result is Ohio Coating's dilemma—a 60 percent capacity utilization rate and no ready supply of black plate from either its parent company, companies with close ties to it, or other outside suppliers. There is no expectation that a stand-alone Weirton, similarly configured, would fare better. It would likely fare worse, given the lack of any affiliated supplier of black plate.

C. There Are No Legitimate Suitors for Weirton

Weirton has long been perceived as one of the weakest and least competitive steel producers in the U.S. industry. To Silgan's knowledge, the only individual to surface expressing a desire to acquire the Weirton assets, Mitch Hecht, is not taken seriously by Mittal and has presented no viable business plan.

Mr. Hecht's estimates on start-up costs to get the Weirton blast furnaces running are overly optimistic, including a proposed initial investment of just $10 million, including the purchase price. Hecht has been even more ambiguous about working capital needs and what he sees as necessary longer term investment in the “several” tens of millions of dollars.

49

These “estimates” apparently do not even consider the necessary investment in the rolling assets, but focus only on the blast furnaces, although Mr. Hecht has expressed interest in acquiring the rolling assets as well.

50

49

Scott Robertson, Mittal Shows Little Interest in Weirton Furnace Sale, American Metal Market (May 5, 2006) (Attachment 39).

50

Mittal Steel Plans to Sell Dofasco, Hecht Waits for Weirton, Steel Business Briefing (August 16, 2006) (Attachment 40).

D. Divesting Weirton Will Have an Adverse Impact on Competition

Given that there is no existing steel entity interested in buying Weirton and since an independent Weirton would be entirely unprofitable, a decision to divest Weirton will result in an increase in the HHI. As detailed in the chart below, using the public data available to us, Silgan estimates that prior to the Mittal-Arcelor merger the HHI for the Eastern U.S. tin industry was 3058. With the Mittal-Arcelor merger, Silgan estimates that the HHI now stands at 3446. Assuming that Weirton is divested and it survives as a standalone entity, the HHI would fall to 2761.

51

51

The full analysis is provided at Attachment 41 (“HHI Impact of Alternative Divestiture Scenarios”).

Figure 7.—HHI Anlaysis: Post-Merger and Weirton Market Exit

HHI impact

Pre-merger

3058

Post-merger (no divestiture)

3446

Remedy-Divest Weirton

2761 (if Weirton survives).

3645 (if Weirton fails).

Unfortunately, as the above discussion makes clear, the divestiture of Weirton will almost certainly result in failure and the exit of Weirton from the tin industry. Assuming that Weirton is divested and it does not survive as standalone entity, the HHI will rise to 3645.

It is Silgan's belief that this latter scenario is quite likely; indeed, Silgan knows of no industry expert who would give a stand-alone Weirton more than a 20% chance of surviving. Consequently, this implies that the expected result of a Weirton divestiture is a higher, not lower, HHI. In fact, unless the DOJ believes that a stand-alone Weirton has a better than a two out of three chance of surviving (an unduly optimistic belief in Silgan's opinion), the expected result of a Weirton divestiture is a less competitive market.

52

Given Weirton's poor prospects as a standalone producer, allowing Mittal to divest Weirton runs contrary to the goal of improving competition in tin market.

52

The full analysis is provided at Attachment 42 (“Probability that Divestiture Will Improve Competition”).

The increase in HHI is only one probable consequence of a divestiture of Weirton. A failed Weirton would remove more than 800,000 tons of tin-making capacity from the market. With Weirton in the market can-makers are often put on allocation and struggle to get delivery of product. The removal of about 20% of U.S. production capacity will make the current bad situation truly dire.

III. A Divestiture of Sparrow's Point Would Also Be a Far Less Effective Remedy Than Divesting DoFasco

A. Divestiture of Sparrows Point Is Unlikely To Enhance Competition Over the Long Term

As discussed above, Weirton does not have the ability to survive on its own. And, without Sparrows Point, Weirton is unlikely to survive as part of the Mittal-Arcelor enterprise. The reason is straightforward: Without Sparrows Point, Weirton will not be able to secure sufficient volumes of feedstock to produce tin mill steel.

Within the Mittal system, Sparrows Point is a key supplier of slab for Weirton. For example, Silgan's understanding is that

all

the tin free steel (“TFS”) originating at the Weirton facility is produced using Sparrows Point slab. A Sparrows Point facility operating outside the Mittal system would limit the supply of this key feedstock to Weirton and thereby threaten the ongoing viability of Weirton.

And, as importantly, all indications are that other slab producers within Mittal Steel's collection of facilities either cannot or are unlikely to become reliable suppliers to Weirton's tin mill steel operations. Specifically, (1) Dofasco's current product mix and sales make Dofasco an unlikely replacement for Sparrows Point as a supplier of feedstock to Weirton, (2) given lower tin mill steel profitability compared to other flat-rolled products, it is unlikely that Mittal Steel's other U.S. slab producers will divert scarce feedstock to Weirton, and (3) it would make no economic sense for Mittal's Brazilian affiliate, CST, to supply slabs to Weirton.

Silgan discusses these points below.

1. Dofasco Is an Unlikely Replacement for Sparrows Point in Supplying Slabs to Weirton

As discussed above, if Sparrows Point is divested, it is unlikely that Dofasco would replace Sparrows Point as a key supplier of slab to Weirton. First, Dofasco is already a producer of tin mill steel and, while Sparrows Point may claim the same status, Dofasco is also a key supplier to the auto sheet market,

53

where profit margins are among the strongest in the industry. Sparrows Point is not a significant player in that market.

54

There would be virtually no economic incentive for Mittal to divert slabs from Dofasco and reduce production in the high margin auto sheet segment. Dofasco's slab production must also support other Dofasco downstream operations, including its hot-rolled, cold-rolled and pipe facilities.

55

53

Dofasco is the fourth-largest producer of auto sheet in the North American market, at roughly 1 million tons, behind the multi-site operations of Mittal Steel, U.S. Steel and AK Steel. See Peter Marsh, Massive Bids on Table as Giants Fight for Dofasco, Financial Times (January 13, 2006) (Attachment 4).

54

According to long-time steel analyst Charles Bradford, Sparrows Point (“doesn't have those (automotive) grades.” Scott Robertson, Mittal Sparrows Point Mill May Be On Action Block, American Metal Market (June 2, 2006) (Attachment 5).

55

2005 Directory of Iron and Steel Plants, Association for Iron and Steel Technology (2005) at 98-101 (listing flat-rolled assets) (Attachment 6). Dofasco Tubular Products is the largest and most diversified producer of tubular products in North America. See

http://www.dofascotube.com/Default.htm

(Attachment 3).

More importantly, Dofasco is not self-sufficient in slabs, but itself requires as much as 750,000 tons in purchased slab to feed its rolling and finishing operations.

56

Thus, to maintain efficient capacity utilization rates at all of its production lines, Dofasco needs every ton of slab it produces and acquires.

56

Diana Kinch, CST to Hike Slab Sales to Dofasco, American Metal Market (March 22, 2006) (Attachment 29).

2. It Is Unlikely That Mittal Steel's Other North American Slab Producers Will Divert Scarce Feedstock to Weirton

Divesting Sparrows Point will cause Mittal Steel to have one fewer steel-making facility. With one less blast furnace operating to support its operations, Weirton becomes more vulnerable to blast furnace outages—some planned, some unplanned—that aer a regular occurrence in the steel industry. Blast furnace relines as well as accidents can cause significant supply disruptions, particularly if slab supply is already tight. Any problem at Mittal's other steel-making facilities in Burns Harbor, Cleveland, or Indiana Harbor will result in a reduction of slab supplied to Weirton's tinning lines. Facing a supply shortage, Mittal USA would have a strong incentive to divert its limited supply of slabs away from the downsized tin mill steel market in order to maintain production volumes in the more robust galvanized and cold-rolled markets. The result would be significant production delays at Weirton. Given the tight timing requirements for tin mill steel, where can-makers demand just-in-time delivery, such delays would be devastating to Weirton's customers.

Without Sparrows Point's slab capacity, the likelihood that Mittal will ration Weirton's slab supply is greatly increased. As the chart below makes clear, the difference in profit margins between other flat-rolled products and tin mill steel is just too great to justify sending scarce feedstock to Weirton.

Figure 8.—Comparison of U.S. Industry Profitability for Flat-Rolled Products

[Operating margin]

2004

2005

Galvanized

57

10.9%

5.4%

Plate

58

22.0%

25.4%

Hot-Rolled

59

22.1%

Not available.

Tin Mill

60

−0.9%

−0.7%

Very simply,

Weirton will not be the best use of Mittal's limited slab supply in the Midwest that services more profitable operations.

57

ITC Prehearing Staff Report, Certain Carbon Steel Products from Australia, Belgium, Brazil, Canada, Finland, France, Germany, Japan, Korea, Mexico, Poland, Romania, Spain, Sweden, Taiwan, and the United Kingdom, Inv. Nos. AA1921-197 (Second Review); 701-TA-319, 320, 325-328, 348, and 350 (Second Review); and 731-TA-573, 574, 576, 578, 582-587, 612, and 614-618 (Second Review) (September 25, 2006) at Table CORE-III-8 (Attachment 43).

58

Id. at Table CTL-III-9.

59

Certain Hot-Rolled Flat-Rolled Carbon-Quality Steel Products From Brazil, Japan, and Russia, Inv. Nos. 701-TA-384 and 731-TA-806-808 (Review), USITC Pub. 3767 (April 2005) at Table III-11 (Attachment 44).

60

Tin and Chromium Coated Steel Sheet from Japan, Inv. No. 731-TA-860, USITC Pub. 3860 (June 2006) at Table III-8 (Attachment 38).

3. It Would Make No Economic Sense for Mittal's Brazilian Affiliate CST To Supply Slabs to Weirton

Within Mittal's global steel operations, its Brazilian affiliate CST (Arcelor/Brazil) is a significant producer of slab for sale in export markets. CST also has plans to expand its slab capacity in the very near term, with the introduction of some 2.5 million tons of new slab capacity at the close of this year. CST, however, is an unlikely candidate to ship a significant tonnage of slab to Weirton.

CST is already a major supplier of slab to Dofasco, shipping some 400,000 tons with plans to increase that amount, perhaps to meet all of Dofasco's merchant slab requirements (750,000 tons).

61

It would make more economic sense to ship this slab to Dofasco, a high profit margin producer that needs the slab to fill capacity in high demand, than to Weirton.

61

Id.

The window in which CST might ship to Weirton is also limited since it has plans to increase its own hot-rolled sheet capacity by 2.5 million tons by 2008, the same amount as its slab

capacity expansion.

62

Between servicing this new hot-rolled capacity and other profitable global accounts, CST would be very reluctant to allocate slab for supply to Weirton. Under the circumstances, as a rational economic actor seeking to maximize profits, there is no justification for Mittal to ship slabs from CST to Weirton.

62

Diana Kinch, Arcelor Brasil Sets Sights On New Slab Plant, American Metal Market (May 1, 2006) (Attachment 28)

B. Divesting Sparrows Point Will Have an Adverse Impact on Competition in the Medium to Long Term

From the standpoint of consumer impact, the divestiture of Sparrows Point is, at best, a highly risky policy option. As detailed in the chart below, Silgan estimates that, prior to the Mittal-Arcelor merger, the HHI for the Eastern U.S. tin industry was 3058; following the merger, Silgan estimates that the HHI will be 3446. Assuming that Sparrows Point is divested and that such divestiture neither adversely impacts Weirton's viability nor alters Sparrow Point's commitment to tin, the HHI would fall to 2836.

63

63

The full analysis is provided at Attachment 41 (“HHI Impact of Alternative Divestiture Scenarios”).

Figure 9.—Weirton and Sparrows Point HHI Analysis

HHI impact

Pre-merger

3058.

Post-merger (no divestiture)

3446.

Remedy-Divest Sparrows Point

2836 (if both W & SP survive).

3421 (if Weirton fails).

3495 (if SP does not maintain its tin operations).

Regrettably, the necessary conditions for an improvement in the concentration metric (both Weirton and Sparrows Point surviving upon divestiture) are unrealistic and not likely to materialize. As explained above, the divestiture of Sparrows Point will significantly threaten the reliable supply of quality slab to the Weirton facility and hence will jeopardize Weirton's viability. While Weirton would not likely fail immediately, the lack of reliable captive slab supply will result in the exit of Weirton from the tin industry. Such exit from the industry would cause the HHI to rise to 3421. Said differently, if the divestiture of Sparrows Point results in Weirton failing, the Sparrows Point divestiture would be totally ineffectual in restoring competitive balance to the tin industry.

Further weakening the benefits of a Sparrows Point divestiture is the question of Sparrows Point's commitment to the tin market. As discussed, Sparrows Point has never operated as a stand-alone facility and is not only likely to invest insufficiently in making its tin lines world class. If a stand-alone Sparrows Point is not committed to its tin facility, the HHI would be 3495. Again, this implies that the Sparrows Point divestiture would be totally ineffectual in restoring competitive balance to the tin industry.

In sum, the divestiture of Sparrows Point is a risky gambit. The Department of Justice's competition policy should not be based on hope and a prayer. If the DOJ believes that either of the above two scenarios has more than a one in two chance of occurring, the expected result of a Sparrows Point divestiture is a less competitive market.

Conclusion

For all the foregoing reasons, we ask that the Department adopt the following approach in designing an appropriate remedy to address the reduced competition in the tin mill steel market.

• First, the Department should make every effort to accomplish the divestiture of Dofasco.

• Second, if immediate divestiture is not possible, Silgan strongly recommends the consent decree be modified to wait the five years reportedly necessary to eliminate any existing legal impediments to the divestiture of Dofasco. An independent Dofasco in five years is better than any of the other alternatives for preserving competition.

Respectfully submitted,

Theodore C. Whitehouse

James P. Durling

Daniel L. Porter

Matthew McCullough

Willkie Farr & Gallagher LLP, 1875 K Street, NW., Washington, DC 20006, (202) 303-1000.

List of Attachments

1.

United States

v.

Mittal Steel Company,

Proposed Final Judgment and Competitive Impact Statement, 71 Fed. Reg. 50084, 50085, 50093 (August 24, 2006).

2. World Steel Dynamics (2005).

3.

http://www.dofascotube.com/Default.htm.

4.

Massive Bids on Table as Giants Fight for Dofasco,

Financial Times (January 13, 2006).

5.

Mittal Sparrows Point Mill May Be On Auction Block,

American Metal Market (June 2, 2006).

6. Excerpts from

2005 Directory of Iron and Steel Plants,

Association for Iron and Steel Technology (2005).

7.

The Strange Case of Weirton Steel,

MakingSteel.com (April 25, 2006).

8.

Fewer Blast Furnaces, But Higher Productivity,

New Steel (November 1996).

9.

See How a Blast Furnace Works,

AISI.

10.

Ironmaking Process Alternative Screening Study

—Volume I, Summary Report, Lockwood Greene study for the Department of Energy (Oct. 2000).

11.

ISG To Repair, Restart Second Blast Furnace at Weirton Unit,

American Metal Market (July 14, 2004).

12.

Mittal Steel USA Works to Restore Furnace at Sparrows Point,

PRNewswire (July 14, 2006).

13.

Ispat Inland Accelerates Maintenance Outages,

Ispat Inland Press Release (March 7, 2005).

14.

Weirton Workers Buyout

from Online NewsHour, September 23, 1983;

http://www.pbs.org/newshour/bb/business/july-dec83/steel_9-23-83.html.

15.

High Production Costs Hamper AK Steel's Middletown Works,

Steel Business Briefing (Aug. 10, 2006).

16.

Dofasco Seals $251m Purchase of Canadian Iron Ore Miner QCM,

American Metal Market (July 26, 2005).

17.

Force Majeure Clobbers Coke-Short Steelmaking: Weirton Eyes Option, Blast Furnace Closure

, American Metal Market (Jan. 9, 2004).

18.

Heat Back on Steel Makers

, The Plain Dealer (February 26, 2004).

19.

Furnace Will Stay Idle at Weirton Steel Mill

, Associated Press (Dec. 2, 2005).

20.

The shipping news & forecast: District ports face many competitive challenges, but whether they sink or

swim over the long term will likely depend on infrastructure improvements

, Minneapolis Federal Reserve fedgazette (January 2003).

21.

Weirton Files for Ch. 11; 1,000 Ohio Jobs Affected

, Associated Press (May 20, 2003).

22. Testimony of Bill Stephans, Division Manager for TMP at Mittal Steel USA's-Weirton Facility from

Hearing Transcript, In the Matter Of: Tin and Chromium Coated Steel Sheet from Japan

, Inv. No. 731-TA-860 (Review) (April 27, 2006).

23.

ISU Irked by Mittal Steel's Plan To Shut Weirton Galvanizing Line

, American Metal Market (Feb. 3, 2006).

24. Excerpts of Testimony from

Hearing Transcript, In the Matter Of: Tin and Chromium Coated Steel Sheet from Japan

, Inv. No. 731-TA-860 (F) (June 29, 2000).

25.

Brazil Slab Hits $555/T In Tight Export Market

, American Metal Market (June 5, 2006).

26.

Wheeling-Pittsburg Makes Loss, Despite Rising Market

, Steel Business Briefing (May 11, 2006).

27.

Esmark To Shut Wheeling-Pitt BF If Bid Succeeds

, Steel Business Briefing (Aug. 23, 2006).

28.

Arcelor Brasil Sets Sights On New Slab Plant

, American Metal Market (March 22, 2006).

29.

CST to Hike Slab Sales to Dofasco

, American Metal Market (March 22, 2006).

30.

Gerdau Acominas Charging Into Slab Mart

, American Metal Market (June 30, 2006).

31.

CSA Steel Project Receives License

, American Metal Market (July 6, 2006).

32.

North America at Top of TK's Agenda

, American Metal Market (August 11, 2006).

33.

Groundwork Laid For Brazil's Ceara Slab Project

, American Metal Market (September 1, 2006).

34.

CSN May Lift Slab Capacity Of Two Projects

, American Metal Market (September 1, 2006).

35.

Brasil's Usiminas Casts Sights Abroad For New Slab Project Partner

, American Metal Market (August 29, 2006).

36.

Russia's Severstal Wants to Ship More Steel to U.S.

, Reuters (February 2, 2004).

37.

Tin and Chromium Coated Steel Sheet from Japan

, No. 731-TA-860 (Review), USITC Pub. 3860 (June 2006) at V-8.

38.

Tin and Chromium Coated Steel Sheet from Japan

, Inv. No. 731-TA-860 (Review), USITC Pub. 3860 (June 2006) at Table III-8.

39.

Mittal Shows Little Interest in Weirton Furnace Sale

, American Metal Market (May 5, 2006).

40.

Mittal Plans to Sell Dofasco, Hecht Waits for Weirton

, Steel Business Briefing (August 16, 2006).

41. “HHI Impact of Alternative Divestiture Scenarios”.

42. “Probability that Divestiture Will Improve Competition”.

43. ITC Prehearing Staff Report,

Certain Carbon Steel Products from Australia, Belgium, Brazil, Canada, Finland, France, Germany, Japan, Korea, Mexico, Poland, Romania, Spain, Sweden, Taiwan, and the United Kingdom, Inv.

Nos. AA1921-197 (Second Review); 701-TA-319, 320, 325-328, 348, and 350 (Second Review); and 731-TA-573, 574, 576, 578, 582-587, 612, and 614-618 (Second Review) (September 25, 2006) at Tables CORE-III-8 and CTL III-9.

44.

Certain Hot-Rolled Flat-Rolled Carbon-Quality Steel Products From Brazil, Japan, and Russia

, Inv. Nos. 701-TA-384 and 731-TA-806-808 (Review), USITC Pub. 3767 (April 2005) at Table III-11.

Attachment 1—

United States

v.

Mittal Steel Company

, Proposed Final Judgment and Competitive Impact Statement 71 FR 50084, 50085, 50093 (August 24, 2006)

The attachment is available in the

Federal Register

, 71 FR 50084.

Attachment 2—World Steel Dynamics (2005)

Positioning of 23 World-Class Steelmakers as of June 2005

[Version A—by Factor Weight]

1=least favorable

1

10=most favorable

1

Arcelor

E.U

Anshan

Steel

China

Bao-

Steel

China

Blue-

Scope

Australia

China

Steel

Taiwan

Corus

UK

CSN

Brazil

CST

Brazil

Dofasco

Canada

Gerdau

Brazil

JFE

Japan

Annual Steel Shipments (million tons)

53

10

19

8

12

23

5

5

5

15

30

Factor

Weight

(percent)

1 Cash operating costs

10

6

8

8

8

7

5

10

10

6

7

6

2 Harnessing technological revolution

10

6

7

8

7

5

4

4

6

6

5

7

3 Profitability in 2000-2004

6

4

8

10

9

8

4

10

8

9

10

6

4 Balance sheet

6

7

4

8

8

10

8

7

5

7

9

7

5 Dominance country/region

6

4

10

10

4

3

2

8

8

3

7

2

6 Domestic market growth

5

6

7

8

7

5

4

4

6

6

5

7

7 Expanding capacity

5

3

10

9

6

3

2

6

10

3

8

3

8 Access to outside funds

4

7

6

10

9

9

5

6

9

9

8

8

9 Cost-cutting efforts

4

10

9

7

7

6

10

6

6

6

6

10

10 Downstream businesses

4

5

3

4

9

3

7

5

3

4

6

10

11 Environment and safety

4

9

9

9

9

9

9

9

9

9

9

9

12 Iron ore and coking coal mines

4

3

7

4

4

3

3

7

3

5

4

3

13 Liabilities for retired workers

4

6

6

8

6

6

10

7

10

7

8

6

14 Location to procure raw materials

4

6

7

8

8

8

8

7

8

6

5

8

15 Alliances, mergers, acquisitions and JVs

4

10

9

9

7

6

4

7

7

7

10

9

16 “Pricing Power” with large buyers

4

8

4

8

8

10

8

7

5

7

7

8

17 Threat from nearby competitors

4

5

4

5

8

8

5

7

6

6

7

7

18 Product quality

4

9

5

9

8

8

8

7

8

9

6

10

19 Skilled and productive workforce

4

8

5

7

8

8

8

7

9

10

8

10

20 Stock market performance (3-year)

4

9

9

9

9

9

9

9

9

9

9

9

Average Score

6.55

6.85

7.90

7.45

6.70

6.15

7.00

7.25

6.70

7.20

7.25

Ranking

1

18

14

4

7

15

23

13

9

15

11

9

Weighted-Average Score

6.07

6.75

7.61

7.05

6.22

5.60

6.80

6.98

6.19

6.81

6.66

Ranking

1

20

12

4

7

18

23

10

8

19

9

13

1

Many of these rankings are subjective and some are duplicative.

2

Plants in many countries, includes lspat International.

Source: WSD estimates.

Positioning of 23 World-Class Steelmakers as of June 2005

[Version A—by Factor Weight]

1=least favorable

1

10=most favorable

1

Mittal

1

Steel

Maanshan

China

Nippon Steel

Japan

Nucor

USA

POPSO

S.K.

SDI

USA

Severstal

Russia

Shagang

China

Tata Steel

India

Thyssen/Krupp

Germany

U.S. Steel

USA

Wuhan

China

Avg.

Annual Steel Shipments (million tons)

62

8

30

20

34

4

13

5

5

19

21

10

18

Factor:

1 Cash operating costs

7

7

6

8

8

8

10

6

10

5

6

7

7.4

2 Harnessing technological revolution

7

6

7

10

9

9

6

7

7

6

5

6

6.5

3 Profitability in 2000-2004

7

7

6

7

10

9

9

8

10

4

4

8

7.6

4 Balance sheet

8

6

7

6

10

4

8

4

8

6

6

6

7.0

5 Dominance country/region

6

10

2

2

6

2

8

10

10

2

2

10

5.5

6 Domestic market growth

7

6

7

10

9

9

6

7

7

6

5

6

6.5

7 Expanding capacity

8

10

3

10

4

10

9

10

10

5

3

9

6.6

8 Access to outside funds

10

6

8

10

10

9

9

5

10

7

7

6

8.0

9 Cost-cutting efforts

10

9

9

6

6

6

6

6

8

8

8

8

7.5

10 Downstream businesses

5

7

10

10

7

6

7

2

5

10

3

2

6.0

11 Environment and safety

9

9

9

9

9

9

9

9

9

9

9

9

9.0

12 Iron ore and coking coal mines

7

5

3

4

10

3

10

3

7

3

4.9

13 Liabilities for retired workers

7

6

6

10

8

10

8

10

6

6

5

6

7.4

14 Location to procure raw materials

8

6

8

6

8

6

7

8

10

5

8

6

7.2

15 Alliances, mergers, acquisitions and JVs

10

7

7

10

8

10

8

8

9

9

10

8

8.2

16 “Pricing Power” with large buyers

8

4

8

4

10

3

9

3

8

7

5

4

6.8

17 Threat from nearby competitors

6

4

7

4

10

4

8

4

7

5

5

4

6.0

18 Product quality

7

5

10

7

10

7

6

5

8

9

9

6

7.7

19 Skilled and productive workforce

8

5

10

10

10

10

7

7

8

9

9

5

8.2

20 Stock market performance (3-year)

10

9

9

9

9

9

10

5

9

9

9

9

8.9

Average Score

7.75

6.70

7.10

7.79

8.25

7.37

8.00

6.35

8.45

6.50

6.25

6.40

7.16

Ranking

1

6

15

12

5

2

8

3

21

1

19

22

20

Weighted-Average Score

7.21

6.52

6.54

7.10

7.87

6.75

7.65

6.27

8.11

5.93

5.70

6.29

6.76

Ranking

1

5

15

14

6

2

11

3

17

1

21

22

16

1

Many of these rankings are subjective and some are duplicative.

2

Plants in many countries, includes Ispat International.

Source: WSD estimates.

Attachment 3—

http://www.dofascotube.com/Default.htm

The attachment is available at the following Web site,

http://www.dofascomarion.com/Default.htm

Attachment 4—

Massive Bids on Table as Giants Fight for Dofasco,

Financial Times (January 13, 2006)

Massive Bids on Table as Giants Fight for Dofasco

Scarcity and an iron ore mine drive the battle between Arcelor and ThyssenKrupp for the Canadian steelmaker, says Peter Marsh.

By Peter Marsh

13 January 2006

Financial Times

(c) 2006 The Financial Times Limited. All rights reserved

The global steel industry has been through a transformation as spectacular as any to have affected the business world in the past few years.

That is confirmed in the bidding battle between Arcelor and ThyssenKrupp, two giants of the European steel industry, for Dofasco, a mid-sized Canadian steelmaker that both companies are valuing at more than USDollars 4bn.

Luxembourg-based Arcelor is considering whether to make a fresh bid for the Ontario company higher than that tabled by its German rival—and other companies could still enter the fray. Just before Christmas, Lakshmi Mittal, chairman and majority owner of Mittal Steel, the world's biggest steelmaker, indicated he had not ruled out making an offer for Dofasco, even though such a move is considered unlikely. Mr. Mittal has been a prime initiator of steel industry mergers since 2000 that have increased the size of the main players in the sector and put them in a much stronger position to dictate terms to customers. At the same time, steel prices have rocketed due to rapacious demand from China as its economy has expanded to suck in about 30 percent of world steel output.

As a consequence, share prices of quoted steel companies in recent years have been among the best performers on global stock markets, despite a downturn in recent months. Thyssen's most recent January 3 offer of CDollars 63 a share values Dofasco at CDollars 4.9bn (USDollars 4.2bn). It was pitched at the same level as a rival bid by Arcelor—which started the effort to acquire Dofasco through a CDollars 56-a-share bid in November. But the Canadians regard Arcelor as a predator and the Dofasco board is backing the Germans, at least in part because if it sells to another suitor, Dofasco would have to hand Thyssen a CDollars 100m break-up fee.

Mike Locker, of Locker Associates, a US steel consultancy, says the magnitude of both bids is “eye-popping”, given that Dofasco is a relatively small player with production last year estimated at about 5m tonnes. In the first nine months of 2005, Dofasco turned in net income of CDollars 142.6 m on sales of CDollars 2.69bn, with the earnings figure well down on the CDollars 280.1m net income recorded in the first nine months of 2004, a result of tougher conditions generally in the steel industry in the early part of last year.

But in spite of the earnings drop, Mr. Locker still thinks the high price of the offers can be justified, given Dofasco's strong position in higher-value segments of the steel industry—particularly in flat galvanized sheet used for car bodies. About 75m tonnes of this material—which has to be made using special processes so it is especially shiny and resistant to corrosion—is made each year, with Arcelor being the world leader with about 10m tonnes.

While Thyssen is well behind with 5m tonnes, both are keen to expand in this field in North America—where Dofasco is the fourth biggest producer with output estimated at about 1m tonnes a year. Mittal Steel and US Steel are the two largest producers of automotive sheet steel in the region—with global output of 6m tonnes and 5m tonnes respectively, most of this coming from their US plants.

The third player in North America, with 2m tonnes, is AK Steel—which has been in financial difficulties and is burdened by healthcare and pensions liabilities estimated at Dollars 3.5bn. “Since neither Mittal nor US Steel is available, and AK is probably ruled out, there is a scarcity value about Dofasco (in automotive steel) which inevitably increases its price,” says Mr. Locker.

Another attraction of the Canadian company is its ownership of QCM, an iron ore mine in Quebec. This raw material has been in short supply in the past two years, with a consequent big increase in price.

Michelle Applebaum, of Michelle Applebaum Research, an Illinois-based consultancy, says “roughly a third” of the money Arcelor and Thyssen are prepared to pay for Dofasco could be linked to ownership of the mine—which produces about 16m tonnes of ore a year, most for sale to other steelmakers.

Attachment 5—

Mittal Sparrows Point Mill May Be On Auction Block,

American Metal Market (June 2, 2006)

Mittal Sparrows Point Mill May Be on Auction Block

By Scott Robertson

PITTSBURGH—Mittal Steel Co. NV reportedly is shopping its integrated steel mill in Sparrows Point, Md., as part of what appears to be a contingency plan if its proposed acquisition of Arcelor SA, Luxembourg, falls through.

Executives from ThyssenKrupp AG, which is in line to buy Dofasco Inc. if Mittal acquires Arcelor, toured the Sparrows Point plant last week and have expressed interest in it, according to Mittal sources.

Mittal reportedly is entertaining a sale of the Sparrows Point plant, formerly owned by Bethlehem Steel Corp. and later by International Steel Group Inc., in an antitrust maneuver.

Mittal is interested in acquiring Arcelor and has reached an agreement to sell Dofasco—currently held in a trust created by Arcelor—to ThyssenKrupp if it succeeds in getting Arcelor.

Arcelor, however, has reached an agreement to acquire Russian steel producer OAO Severstal that could take Mittal out of the picture. The possible sale of the Sparrows Point plant to ThyssenKrupp might be a contingency plan should Mittal be unable to complete the promised sale of Dofasco as part of an Arcelor takeover.

A spokesman for Mittal Steel USA Inc., Chicago, said Thursday that its Rotterdam-based parent expects to complete the Arcelor purchase and to move forward with its sale of the Dofasco mill in Hamilton, Ontario, to ThyssenKrupp. In that case, he said, “no other moves would be necessary.”

The U.S. Department of Justice already has granted conditional approval to the Mittal merger with Arcelor. The conditions stipulate that it dispose of certain operations—interpreted to be Dofasco.

Calls to managers at the Sparrows Point plant, to Mittal Steel offices in London and to ThyssenKrupp in Dusseldorf, Germany, were not returned by late Thursday.

It is not unusual for representatives of steel producers to tour each other's plants, so in some respects a ThyssenKrupp tour of Sparrows Point could be viewed as something done in the normal course of business. The appearance of ThyssenKrupp representatives at the plant, however, sparked widespread industry chatter that the plant was on the block and

could be part of a Mittal-ThyssenKrupp contingency plan.

When it announced last month it was improving its bid for Arcelor, Mittal Steel said it would consider selling other North American assets if it could not complete the sale of Dofasco to ThyssenKrupp.

Several sources said that while the contingency plan idea might be true, a ThyssenKrupp acquisition of Sparrows Point would not mesh with its goals for the North American market. ThyssenKrupp, which lost out in a bidding war with Arcelor for Dofasco earlier this year, in the past has been rumored to be interested in acquiring AK Steel Corp., Middletown, Ohio, or U.S. Steel Corp., Pittsburgh, in an effort to gain entry to the North American automotive market.

“Sparrows Point doesn't have those (automotive) grades,” longtime steel industry analyst Charles Bradford said. “If (Mittal) were going to get rid of something in North America, I don't think it would be Sparrows Point. I think if they had their druthers, they'd sell Weirton, but that does not meet what ThyssenKrupp needs, either.

“I think it would be more likely that they would get rid of Inland,” he said, referring to the former Ispat Inland plant in East Chicago, Ind. that is now part of Mittal's Indiana Harbor division. “It used to be said that Inland and Dofasco were like brother and sister in terms of the things they did, so that would make more sense to me. Getting rid of Sparrows Point does not make sense from an antitrust perspective because it is not related to automotive like Inland and Dofasco are.”

Bradford added that ThyssenKrupp's presence in the global stainless steel market and its ownership of ThyssenKrupp Budd Co., an automotive parts manufacturer in Troy, Mich. also make an acquisition of Sparrows Point unlikely.

“They (Budd) are a parts-maker and chassis maker,” Bradford said. “Again, that does not fit with what Sparrows Point does. But you always go and take a look whenever a competitor gives you that opportunity, you take advantage of it.”

Another market source close to the Sparrows Point plant said the visit could be nothing more than a smokescreen. “ThyssenKrupp announced a few days ago it will downsize its steel business,” he said. “So while an outpost in North American could be good for ThyssenKrupp, since they won't get Canada's Dofasco (in the case of a Severstal-Arcelor merger), there might be less to this than meets the eye.

“Maybe this was done on behest of Mittal to raise interest among other (potential) investors,” he said. “I know ThyssenKrupp and Mittal are pretty tight at the moment.”

Attachment 6—Excerpts from

2005 Directory of Iron and Steel Plants,

Association for Iron and Steel Technology (2005)

Iron and Steel Plant Facilities

[CSN USA—Cont'd]

Identification

Capacity,

tons/year

Bases

Furnaces

Atmosphere

Batch Annealing

308,000

12 4-high stack

6

100% H

2

Identification

Nominal width, in.

Capacity, tons/year

Product size, thickness × width, in.

Low C

Motor Lam.

Configuration

Temper/Skinpass Mill

Max width: 73 untrimmed, 72 trimmed

600,000

0.012 min

0.025 min

Single stand 4-h.

Min. width: 34

0.100 max

0.040 max

Dynamic Shape Roll.

85 in. max OD.

38 in. min OD.

85,000 max. wt.

Type

Capacity tons/year

Product thickness × width, in.

Cold roll

Hot roll

Width

Differential coating

Galvanizing

Hot dip

350,000

min. 0.012

max. 0.080.

min. 0.050

max. 0.130.

min. 34

max. 73.

Yes.

Identification

Unit capacity, tons/year

No. of units

Product size range

Configuration

Slitting

Pro-Eco

1

0.010-0.175 × 72

85,000 max wt.

Driven slit and slitter assist tension unit Kor-flex leveler.

DOFASCO INC.

Hamilton, Ont., Canada

Battery identification

Type

Battery capacity, tons/year

Ovens per

battery

Oven dimensions, ft-in.

Height

Width, avg.

Length

Byproducts recovered

Cokemaking

1

Gun

148,607

25

13-0

17

39-11

1/8

Tar, ammonium sulfate, light oil, sulfur.

2

Gun

208,050

35

13-0

17

39-11

1/8

3

Gun

267,493

45

13-0

17

39-11

1/8

4

Gun

322,478

53

13-0

17

39-61

1/8

Tar, anhydrous ammonia, light oil, hydrogen.

5

Gun

322,478

53

13-0

17

39-6

1/8

6

Compound/underjet

402,412

35

20-5/32

17

48-1

1/2

Iron and Steel Plant Facilities

Identification

Capacity

tons/day

tons/year

Total height, ft-in.

Hearth dia. ft-in.

Working vol. cu. ft

Injectants

No. of stoves

Blast Furnace

No. 2

2650*

758,300

108-9**

20-9

32,600

Oil, oxygen

3

No. 3

2750*

846,600

108-10

1/2

**

21-6

31,900

Oil, oxygen

2

No. 4

4850*

1.4 million

118-9

3/4

**

28-0

56,320

Oil, oxygen

3

* Instantaneous smelting rate.

** lip ring to foundation pad.

Shop Identification

Process

Capacity, tons/year

No. of vessels

Heat size, tons

Gas cleaning

Steelmaking—Oxygen

K-OBM

2.75 million

1

330

Scrubber and screen.

Process

Capacity, tons/year

No. of vessels

Heat size, tons

Gas cleaning

Transformer rating, MVA

Steelmaking—Electric Arc Furnace

Twin-shell, AC

1.35 million

1

180

Baghouse

120

Type

Total capacity, tons/year

No. of units

Heat size, tons

Injectants

Vacuum Degassing

Tank

1.5 million

1

290

Aluminum for deoxidation after vacuum.

Total capacity, tons/year

No. of units

Heat size, tons

Injectants

Transformer rating, kVA

Ladle Metallurgy

2.37 million (aim)

1 reheat furnace, 2 high-flow stirring stations, 2 deslag stations

330 (avg.)

Nil

40,000

1.35 million

1 reheat furnace to handle two ladle cars (twin-shell)

180

1

20,000

Capacity, tons/year

Strands

Ladle capacity, tons

Product size range, in.

Shroud

Continuous Casting

2.75 million (aim)

2

300

8.5 × 30.5-63 × 177-374

Argon

1.35 million

1

180

8.5 × 30.5-63 × 177-374

Argon.

Mill served

Type

No. of furnaces

Capacity, tons/hr/furnace

Hearth dimensions

Reheating Furnaces

No. 2 hot strip mill

Walking beam

2

400

47.4 × 12.0 m

Iron and Steel Plant Facilities

[DOFASCO INC.—Cont'd]

Nominal width, in.

Capacity, tons/year

Finished size, thickness × width, in.

No. and configuration

Roughing stands

Finishing stands

Hot Strip Mill

68

3.2 million

0.060-0.500 × 30-62

2-hi reversing with attached edgers

Horizontal 54

1/2

× 72, vertical 42 × 43

1/2

7-stand, 4-hi, 30 and 60 × 68.

Identification

Capacity, tons/year

Strip thickness × width, in.

Acid used

Pickling

No. 2

660,000

0.075-0.110 × 24-56

HCl.

No. 3

1,100,000

0.075-0.200 × 24-66

HCl.

No. 4

750,000

0.055-0.275 × 24-62

HCl.

CPCM

1,000,000

0.075-0.215 × 24-62.5

HCl.

Identification

Nominal width, in.

Capacity, tons/year

Finished size, thickness × width, in.

Configuration

Cold Reduction Mill

66 in

66

260,000

0.0195-0.1650 × 24-61

4-hi, single-stand reversing.

No. 1 tandem

56

450,000

0.0072-0.0456 × 24-49

4-hi, 5-stand tandem.

No. 2 tandem

72

1,400,000

0.011-0.0125 × 24-61.5

4-hi, 5-stand tandem.

CPCM

68

1,000,000

0.008-0.100 × 23.5-62

4-hi, 5-stand continuous.

Identification

Capacity, tons/year

Strip thickness × width, in.

Fuel type

Continuous Annealing

No. 2 tower anneal

280,000

0.0077-0.036 × 40 max.

Electric.

No. 1

80,000

0.007-0.025 × 18-48

No. 2

110,000

0.007-0.040 × 18-48

Identification

Capacity, tons/year

Bases

Batch Annealing

Sheet mill batch

575,000

10 × 60-in. radiant tube, HNX, single stack.

112 × 72-in. radiant tube, HNX, single stack.

48 × 72-in. direct-fire, HNX, single stack.

4 × 86-in. direct-fire, 100% H

2

, single stack.

Open coil anneal

52,200

3 × 108-in. radiant tube, HNX, single stack.

11 × 114-in. radiant tube, HNX, single stack.

2 × 114-in. direct-fire, HNX, single stack.

16 × 114-in. radiant tube, HNX, single stack.

Identification

Nominal width, in.

Capacity,

tons/year

Product size, thickness × width, in.

Configuration

Temper/Skinpass Mill

42 in.

42

317,200

0.0061-0.0350 × 20-39.5

4-hi, 2-stand.

56 in.

56

341,000

0.0051-0.0480 × 20-52

4-hi, 2-stand.

No. 1

66

372,800

0.018-0.135 × 20-61

4-hi, single-stand.

No. 2

66

475,900

0.018-0.135 × 20-61

4-hi, single-stand.

No. 5-56

56

300,000

0.012-0.040 × 24-50

4-hi, single-stand.

Type

Capacity,

tons/year

Product thickness × width, in.

Differential coating

Galvanizing

No. 1 hot dip

170,000

0.012-0.080 × 24-48

Galvalume/galvanize.

No. 2 hot dip

320,000

0.024-0.0168 × 24-60

Galvanneal/galvanize.

No. 3 hot dip

254,000

0.010-0.080 × 24-52

Galvanneal/galvanize.

No. 4 hot dip

305,000

0.012-0.080 × 24-60

Galvanize.

DJG hot dip

400,000 (Dofasco 50% ownership)

0.0157-0.0787 × 24-72

Galvanneal/galvanize.

DSG hot dip

450,000 (Dofasco 80% ownership)

0.0196-0.0787 × 36-72

Galvanneal/galvanize.

Sorevco hot dip

125,000 (Dofasco 50% ownership)

0.012-0.0787 × 24-50

Wipe coat/galvanize.

Type

Capacity, tons/year

Product thickness × width, in.

Tinplate

No. 2 E line

144,600

0.0055-0.0230 × 18-40

No. 3 E line, tin/chrome

273,200

0.0055-0.0230 × 58-43

Identification

Unit capacity, tons/year

No. of units

Product size range

Configuration

Slitting

48 in.

64,000

1

19-48

60 in.

350,000

1

0.059-0.100 × 9-64 entry to 2 min. out

62 in.

300,000

1

0.100-0.375 × 17-64 entry to 2

1/4

min. out

Unit

Capacity, tons/year

No. of units

Product size range

Miscellaneous

Prep Line

320,000

1

0.005-0.023

No. 1 Cleaning Line

220,000

1

0.006-0.026

No. 2 Cleaning Line

360,000

1

0.077-0.140 × 18-68

Rewind Line

200,000

1

0.010-0.100 × 25-62

No. 3 Shear Line

50.000

1

0.0081-0.048 × 12.5-40

No. 5 Shear Line

150,000

1

0.014-0.135 × 12.5-67

Iron and Steel Plant Facilities

[International Steel Group—Cont'd.]

Type

Capacity, tons/year

No. of units

Heat size, tons

Injectants

Vacuum Degassing

RH 5-stage steam ejection unit

1 million

2

340

Argon, aluminum

Type

Capacity, tons/year

No. of units

Heat size, tons

Injectants

Ladle Metallurgy

Ladle stirring and Trim Station

3,000,000

1

340

Argon, carbon, aluminum, manganese and scrap.

CAS-OB

3,000,000

1

340

Argon, oxygen, nitrogen, carbon aluminum, manganese, titanium.

Capacity, tons/year

Strands

Ladle capacity, tons

Product size range, in.

Shroud

Continuous Casting

3,000,000

4

340

32-48 × 9 × 400 max.

Argon gas submerged ladle shroud; Fused silica and alumina graphite.

Mill served

Type

No. of furnaces

Capacity, tons/hr/furnace

Hearth dimensions, ft

Reheating Furnaces

54-in. hot mill

Walking beam

2

350

35 × 155

Nominal width, in.

Capacity, tons/year

Finished size, thickness × width, in.

Number and configuration

Roughing stands

Finishing stands

Hot Strip Mill

54

3.8 million

0.056-0.50 × 23-49

1 4-hi reversing, 1 4-hi continuous

7-stand, 4-hi.

Identification

Nominal width, in.

Capacity,

tons/year

Finished size, thickness × width, in.

Configuration

Cold Reduction Mill

No. 7 tandem

52

725,000

0.0065-0.0359 × 22

1/2

-48

5-stand, 4-hi

No. 8 tandem

52

699,000

0.0193-0.138 × 22

1/2

-48

4-stand, 4-hi

No. 9 continuous tandem

52

991,000

0.0065-0.060 × 24

1/2

-48

5-stand, 4-hi

Attachment 7—

The Strange Case of Weirton Steel,

MakingSteel.com (April 25, 2006)

The attachment is available at the following Web site,

http://www.makingsteel.com/weirton.html

Fewer Blast Furnaces, But Higher Productivity

The number of U.S. blast furnaces has dropped from 83 to 43 in the past decade, but PCI and natural gas have helped raise output from the survivors by 25 percent

By William T. Hogan, S.J., and Frank T. Koelble

Father William Hogan and Frank Koelble of Fordham University's Industrial Economics Research Institute recently conducted an extensive study of the current capacity, condition, and outlook of coke ovens and blast furnaces in the U.S. In this two-part study, New Steel looks this month at blast furnaces and next month at coke ovens and at how steelmakers are boosting productivities and responding to new environmental regulations.

A quiet recasting of how the U.S. iron and steel industry makes its iron has been yielding major gains in productivity and major benefits to the environment. Driving this progress has been not some new, “direct” technology but the tried-and-true blast furnace, the dominant ironmaker for more than a century. Today's surviving blast furnaces still support some 60 percent of all U.S. steelmaking activity by producing much more iron and consuming much less coke than they did even a few years ago. And yet, because of impending environmental standards on cokemaking, the future of the blast furnaces is anything but assured.

On Jan. 1, 1998, 90 percent of all U.S. cokemaking capacity will have to meet much stricter standards under the Clean Air Act. Five years later, on Jan. 1, 2003, an initial group of coke batteries will have to meet a new public-health standard, which has not yet been promulgated.

As the two deadlines force more coke plants to close, the current deficit in domestic coke supply is likely to widen appreciably. This could constrain blast-furnace output and offset the recent improvements in productivity, which have allowed for fewer furnaces to sustain and even increase the supply of steelmaking iron.

The U.S. blast-furnace population has declined as the U.S. steel industry has undergone one of the most drastic restructurings in the history of industrial enterprise. At one point, nearly one-third of the industry's raw-steel capacity was downsized out of existence.

The blast-furnace-based integrated steelmakers were hit the hardest. Since 1975, the number of integrated mills with blast furnaces has fallen from 48 to 21. The number of blast furnaces in the U.S. has plummeted from 197 to 43. The most recent shutdown was a year ago, when Bethlehem Steel shut down its blast furnace, basic oxygen furnaces (BOFs), and electric furnace in Bethlehem, Pa., in Nov. 1995 (Steel Forum, Jan. 1995).

Electric furnaces accounted for 40 percent of U.S. steel production last year, up from 28 percent in 1980 and 34 percent in 1985. The growth of scrap-using EAFs has meant that ferrous scrap now accounts for more of U.S. steelmakers' metallics supply than blast-furnace iron.

BOFs accounted for 60 percent of steel production last year—virtually the same as in 1980. BOFs use on average 77-percent blast-furnace iron and 23-percent scrap. Much of the growth of the electric furnaces occurred at the expense of the open hearth, the now extinct process once used by integrated plants and phased out completely in 1991.

The Future Metallics Supply

The growth in blast-furnace productivity and in the output of scrap-based EAFs has helped U.S. steelmakers to have a viable metallics supply in recent years. But several trends do not bode well for the future supply of metallics feedstocks for American mills:

(1) Secular trends in U.S. steel demand and production have shifted from decline to renewed growth. Increasing quantities of both iron and scrap will be needed to support steelmaking over the long term.

(2) Recent levels of U.S. coke and iron demand already have been taxing the limits of coke-oven and blast-furnace capacity.

(3) U.S. coke ovens are of advancing age. Although steelmakers have invested considerably in extending their useful lives, the stricter environmental regulations will make the coke ovens' future operation increasingly difficult and higher in cost.

(4) U.S. steelmakers are depending more on imports of coke and semifinished steel. This ultimately raises the costs of finished-steel output and undermines the U.S. iron and steel industry's long-term competitiveness. In the past, U.S. mills have imported coke and slabs mainly to alleviate temporary shortfalls in domestic coke, iron, and steel production.

(5) Despite advances in scrap-based steelmaking and in the substitution of scrap for iron, electric-furnace melting alone is incapable of meeting U.S. steel demand. Minimills are limited by the availability and cost of high-quality, low-residual scrap and purchased electricity as well as by restrictions on the types and qualities of steel it can produce without access to virgin iron units at an economical cost.

For these reasons steelmakers are investigating new, direct methods of producing iron, both in solid form as a high-quality complement to scrap and in molten form as an alternative to iron

from the blast furnace. However, at least for the next ten years, U.S. mills will implement such ironmaking alternatives on a relatively small scale in comparison to U.S. blast-furnace capacity.

Saving 350 Pounds of Coke per Ton of Iron

U.S. steelmakers currently are operating 40 blast furnaces with a combined annual ironmaking capacity of 61.2 million tons. In addition, three furnaces are designated as “standby” but are unlikely to operate again; these have a combined capacity rating of 2.7 million tons. This brings the total blast-furnace population to 43 units. (All tons in this article are net.)

U.S. steelmakers have eliminated 27 blast furnaces since mid-1990. In June 1990, there were 70 U.S. blast furnaces with a combined capacity of 75.3 million tons.

Most of the blast furnaces shut down in recent years were idled before shutdown. The number of idle furnaces has fallen from 35 in 1986 to three now. The active furnace population declined from 48 in 1986 to 40 in 1996; the total blast-furnace population declined from 83 to 43 during this period (see Table 2).

Despite the shutdown of 27 furnaces since June 1990, the ironmaking capacity of U.S. blast furnaces dropped during that period by just 11.4 million tons—half the capacity represented by the 27 abandoned furnaces. The difference was made up by major productivity gains at the blast furnaces that continue to operate.

While closing the least efficient furnaces, steelmakers now are concentrating ironmaking output at the fewer, more productive blast furnaces. The overall productivity of today's active furnaces is more than one-fourth higher than it was a decade ago. Daily output over the past decade has risen, on average, from 5.5 to nearly 7.0 tons per 100 cubic feet of working volume.

From 1975 to 1995, ironmaking coke needs were cut by more than one-fourth, saving some 350 pounds of coke per ton of iron. The quantity of coke required to smelt one ton of iron fell during this period from 1,222 pounds (0.611 ton) to 874 pounds (0.437 ton) (Table 3). Although the active blast-furnace population declined from 135 to 40 from 1975 to 1995, average yearly output per furnace increased from 590,000 to 1.4 million tons.

Much of the boost in productivity took place recently. It took some 150 pounds less coke to make a ton of iron in 1995 than it did in 1991.

One big reason for the higher productivity is that blast-furnace operators are injecting more supplemental fuels, primarily natural gas and pulverized coal. This not only has reduced coke consumption but also has increased iron output by making additional space available in the furnace to hold iron ore and other iron-bearing materials instead of the coke displaced. Steelmakers also are boosting iron output by:

• Charging scrap metal, direct-reduced iron (DRI), and self-fluxing iron-ore pellets into the blast furnaces;

• Optimizing such hot-blast conditions as temperature and contained oxygen; and

• Using new repair and maintenance techniques, including refractory gunning and grouting, to reduce maintenance downtime and significantly extend furnace campaigns between major relines, obviating the need for standby capacity.

The combined result of these advances has been not only to sharply reduce the coke rate since 1991 but also to boost the aggregate capacity of today's 40 still-active furnaces by some 10 million annual tons.

Leading Blast Furnaces

Acme, AK, National, and U.S. Steel are among the leaders in boosting blast-furnace productivities. Acme's A blast furnace at South Chicago has raised its ironmaking capacity by one-third to a current level of 3,200 tons/day. Acme did this by injecting natural gas at a rate of 250 pounds/ton of iron, by using self-fluxing pellets, and by raising the hot-blast temperature some 100 degrees F to 1,910 degrees F. Acme uses the stoves and hot-blast system of the B furnace to enhance the hot blast on A; this is a primary reason Acme maintains B as standby capacity.

Acme operators eventually plan to raise throughput on the A furnace to more than 4,000 tons/day by injecting additional natural gas and adding scrap to the furnace charge. The increased iron output realized to date has been accompanied by a decline in the coke rate from just above 0.500 to a low of 0.365 ton of coke input ton of iron output.

AK Steel's two remaining blast furnaces, Amanda at Ashland, Ky., and No. 3 at Middletown, Ohio, also have made major productivity gains in the past few years. Employees at Amanda have increased the blast-furnace capacity by 49 percent by using pulverized-coal injection (PCI) at a rate of 200 pounds/ton of iron and by adding BOF slag and scrap to the iron-ore pellets charged.

Operators at the No. 3 furnace in Middletown have boosted capacity by 54 percent to a current level of 6,000 tons/day partly by injecting natural gas at a rate of 215 pounds/ton and using an enhanced burden that contains some 350 pounds/ton of hot-briquetted iron (HBI). The coke input rates have declined from 0.425 ton per ton of iron output at both blast furnaces a few years ago to 0.388 at Amanda in Ashland and 0.353 at No. 3 in Middletown.

A recent reline and upgrading of National's B furnace at Granite City, Ill., boosted its ironmaking capacity by 50 percent from 2,800 to 4,200 tons/day. Improvements included a new furnace top, a newly designed hearth, increased cooling and advanced process controls at the furnace, and a revamp of the stoves to raise the wind rate and hot-blast temperature.

U.S. Steel's four remaining blast furnaces at Gary, Ind., have raised their ironmaking throughput by an average of 30 percent while their combined input coke rate has fallen to 0.340 ton per ton of iron output. The productivity gains largely are due to the use of PCI in all four furnaces at injection rates that, averaged, currently lead the industry.

PCI vs. Natural Gas

Although they have used supplemental fuel injection for decades, U.S. ironmakers in recent years have aggressively increased their injection rates of natural gas and, more recently, pulverized coal. All 40 active blast furnaces today inject either one or a combination of fuels, including natural gas, pulverized coal, oil, tar, and coke-oven gas. Twenty-five furnaces inject natural gas at rates of up to 250 pounds per ton of iron produced; 12 furnaces use PCI at rates of up to 375 pounds/ton.

The volume of natural gas consumed by U.S. blast furnaces has increased nearly 90 percent since 1990, from 56.7 million to 106.5 million cubic feet annually. The acceptance of natural gas stems from its ready availability, its relatively low price in recent years, and its adaptability to injection without major capital or startup costs. Assuming a starting coke input rate of 0.500 ton per ton of iron output (or 1,000 pounds/ton), natural-gas injection has been proven by some mills to be capable of displacing about 25 percent of coke requirements—and maybe more, depending on the outcome of current tests sponsored by the Gas Research Institute.

Although 250 pounds/ton is the highest natural-gas injection rate currently employed, the average rate is a much lower 125 pounds/ton. At most blast furnaces, injection is limited to

between 100 and 200 pounds, because higher volumes unfavorably lower flame temperatures and furnace productivity.

Higher gas-injection rates require increased oxygen enrichment and higher hot-blast temperatures; this is not attainable at some blast furnaces because of limitations in oxygen processing and the capabilities of their hot-blast systems. In such cases, injecting more natural gas would require significant investments to upgrade stoves and other hot-blast components and to make more oxygen available.

Compared to natural gas, PCI has a much less significant impact on process temperatures and affords a greater opportunity for lowering the coke rate. Steel mills have proven that PCI can replace 40 percent of a 1,000-pound coke requirement and can use lower-cost, lower-grade coals in place of the high-grade metallurgical coal needed for cokemaking.

The disadvantage of PCI is that, unlike natural-gas injection, it requires an initial investment of $40-50 million, approximately two-thirds of which can be required for coal preparation. Some blast-furnace operators already injecting 150 pounds or more of natural gas consider this too high a price to pay for increasing injection rates an additional 200 pounds or so by switching to PCI. However, most operators recognize that a commitment to natural gas leaves them vulnerable to a repeat of past run-ups in gas prices.

A number of steel companies with PCI projects have benefited from creative arrangements to reduce or avoid the financial costs of coal preparation. PCI at Inland, for example, is supported by a coal-preparation facility jointly funded by Inland and Northern Indiana Public Service Company. National will obtain pulverized coal for its Ecorse, Mich., blast furnaces from Detroit Edison Company.

Likewise, U.S. Steel reduced its PCI investment at Fairfield, Ala., by obtaining injectable coal from a company-owned mine some five miles away; the coal is transported in specially designed hopper cars to ensure it remains dry. USS/Kobe's PCI unit uses coal pulverizers provided by Ohio Edison.

PCI was developed in the early 1960s by AK Steel's forerunner, Armco. The company first used the new technology commercially at the Ashland plant's now abandoned Bellefonte blast furnace in 1963—the same year Armco completed construction of the Amanda furnace there. Ten years later, Armco installed PCI at Amanda and used it intermittently at varying injection rates until establishing in recent years an average rate of 200 pounds/ton.

Twelve blast funaces in the U.S. now are equipped for PCI (Table 4). Their injection rates range from 120 to 375 pounds/ton and average 254 pounds; blast furnaces can inject as much as 400 pounds/ton, industry managers say. Raising PCI rates will help blast furnaces face future constraints on cokemaking capacity.

Next year Gulf States and National Steel at Ecorse plan to install PCI. LTV is considering using PCI at its Cleveland and Indiana Harbor, Ind., plants, although it has not yet made a final decision.

Startups From 1909 to 1980

In the past few years, steelmakers have made some of their largest productivity gains at some of the oldest blast furnaces. U.S. Steel's Gary No. 8 furnace was built in 1909; rebuilt in 1943; disabled in April 1995 by an explosion near the top of its stack; and returned to service in Aug. 1995 after repairs and an unscheduled reline. No. 8 now produces 40 percent more iron than it did a few years ago. Equipped to use PCI at a rate of some 235 pounds/ton, the No. 8 blast furnace has seen its coke rate decline to the 0.390 level, which makes it more efficient at using coke than some of its counterparts built 60-70 years later.

Roughly 75 percent of the active furnace population is under 30 years of age, and 25 percent over (see Table 1). Startup dates of current U.S. blast furnaces range from the first decade of the century to 1980.

Clearly, blast furnaces that have been rebuilt and retrofitted to take advantage of technological improvements over the years have proven capable of operating indefinitely, and doing so very effectively. As the furnace population has been rationalized and the least efficient units removed from service, age has become a less relevant indicator of useful furnace life. Rather, the most significant influence on future decisions to maintain or discontinue blast-furnace ironmaking will derive from environmental regulations that result in additional cuts in U.S. cokemaking capacity.

Father William Hogan of the Society of Jesus has been a leading authority on the steel industry for the past 45 years. His numerous books include Productivity in the Blast Furnace, The Development of Heavy Industry in the Twentieth Century, Economic History of the Iron and Steel Industry in the United States (a five-volume work), and, most recently, Steel in the 21st Century: Competition Forges a New World Order (1994). The International Iron and Steel Institute has named only two honorary members since its founding in 1967: Fr. Hogan and Herbert Gienow.

Frank Koelble has worked as a steel economist and consultant for the past 30 years. His books include Purchased Ferrous Scrap, An Analysis of the U.S. Metallurgical Coke Industry, and Direct Reduction as an Ironmaking Alternative in the United States. Hogan is director and Koelble associate director of the Industrial Economics Research Institute of Fordham University (Bronx, N.Y.).

The 43 Blast Furnaces in the U.S. Today (Table 1)

Co. & capacity coke capacity

(mil. net tpy)

1

Plant

Furnace

Dia.

2

Rate

3

Year

4

(net tpd)

5

Acme (1.17)

S. Chicago, Ill

A

25′0″

0.365

1964R

3,200

B

19′8″

1970R

(1,200)(S)

AK Steel (4.12)

Ashland, Ky

Amanda

33′5″

0.388

1963B

5,300

Middletown, Ohio

3

29′4″

0.353

1984R

6,000

Bethlehem (8.53)

Burns Harbor, Ind

C

38′3″

0.359

1972B

7,030

D

35′9″

0.397

1969B

6,590

Sparrows Pt., Md

L

44′3″

0.430

1977B

9,750

Geneva (2.45)

Geneva, Utah

1

26′6″

0.448

1963R

2,275

2

26′6″

0.450

1963R

2,250

3

26′6″

0.455

1963R

2,180

Gulf States (1.08)

Gadsden, Ala

2

26′0″

0.490

1966R

2,965

Inland (5.24)

E. Chicago, Ind

5

26′6″

0.393

1974R

2,500

6

26′6″

0.448

1976R

2,450

7

45′0″

0.330

1980B

9,400

LTV (7.68)

Cleveland, Ohio

C1

27′6″

0.413

1972R

3,440

C5

29′6″

0.407

1990R

4,150

C6

29′6″

0.412

1989R

4,350

Ind. Harbor, Ind

H3

29′6″

0.400

1988R

3,950

H4

32′9″

0.421

1987R

5,150

McLouth

6

(1.24)

Trenton, Mich

1

28′6″

1956B

(3,000)(S)

2

28′6″

0.475

1958B

3,400

National (6.46)

Ecorse, Mich

A

30′6″

0.470

1954B

3,450

B

29′0″

0.463

1951B

3,350

D

28′10″

0.440

1952B

2,800

Granite City, Ill

A

27′3″

0.378

1956B

3,900

B

27′3″

0.380

1961B

4,200

Rouge (2.62)

Dearborn, Mich

B

20′0″

0.375

1958R

2,275

C

29′0″

0.385

1959R

4,900

U.S. Steel (12.00)

Fairfield, Ala

8

32′0″

0.420

1978B

6,000

Gary, Ind

4

28′10″

0.368

1950R

3,700

6

28′0″

0.388

1947R

3,750

8

28′0″

0.390

1943R

3,800

13

36′6″

0.290

1974B

9,425

Mon Valley, Pa

1

28′10″

0.448

1943R

3,230

3

25′3″

0.443

1930R

2,975

USS/Kobe (2.30)

Lorain, Ohio

3

28′6″

0.355

1959R

3,600

4

29′0″

0.453

1962R

2,700

WCI (1.50)

Warren, Ohio

1

28′0″

0.470

1980R

4,100

Weirton (2.54)

Weirton, WV

1

27′0″

0.403

1984R

3,770

3

26′3″

0.418

1983R

3,200

4

27′0″

1977R

(3,100)(S)

Wheel-Pitt (2.30)

Steubenville, Ohio

1N

25′0″

0.405

1991R

2,900

5S

23′10″

0.430

1995R

3,400

1

Capacity of active blast furnaces, representing potential maximum productive capability.

2

Hearth diameter of furnace.

3

Coke rate at full ironmaking capacity is expressed as the net tons of coke input per net ton of iron output.

4

Years are designated B for the year built and R for the year in which a major rebuild was last completed. Relinings are not considered rebuilds.

5

( ) indicates idle capacity; (S) indicates standby furnaces.

6

Plant temporarily idled in March 1996; company has been sold to Hamlin Holdings Inc., with operations scheduled to restart in early 1997.

Reducing the Number of U.S. Blast Furnaces (Table 2)

Date

1

Active

Idle

Total

2/86

48

35

83

5/87

45

32

77

9/88

47

25

72

10/89

45

25

70

6/90

46

24

70

8/91

38

19

57

8/92

40

11

51

8/93

40

10

50

8/94

40

9

49

9/95

41

4

45

7/96

40

3

43

1

Dates of surveys conducted by Industrial Economics Research Institute, Fordham University.

Lowering the Coke Rate (Table 3)

[Million of net tons]

Year

U.S. blast-

furnace

production

Coke

consumed

Coke rate

1

1975

79.9

48.8

0.611

1976

86.9

51.6

0.594

1977

81.3

48.5

0.597

1978

87.7

51.3

0.585

1979

87.0

50.0

0.574

1980

68.7

39.1

0.569

1981

73.6

40.5

0.55

1982

43.3

23.3

0.538

1983

48.7

26.3

0.540

1984

51.9

27.4

0.528

1985

50.4

26.6

0.508

1986

44.0

22.3

0.507

1987

48.4

25.5

0.527

1988

55.7

29.4

0.528

1989

55.9

29.2

0.522

1990

54.8

27.5

0.502

1991

48.6

24.8

0.510

1992

52.2

25.0

0.479

1993

53.1

23.7

0.446

1994

54.4

24.2

0.445

1995

56.1

24.5

0.437

1

Data are from American Iron and Steel Institute; coke rate indicates the tons of coke consumed per ton of blast-furnace iron produced.

Pulverized-Coal Injection (Table 4)

Company

Plant

Furnace

Year

started up

Rate

(lbs./ton)

1

AK Steel

Ashland

Amanda

1973

200

Bethlehem

Burns Harbor

2

C

1994

180

D

1994

260

Gulf States Inland

Gadsden

2

1997

E. Chicago

5

1993

245

6

1993

120

7

1993

320

National

Ecorse

A

1997

350P

B

1997

250P

D

1997

250P

U.S. Steel

Fairfield

2

8

1995

270

Gary

4

1993

295

6

1993

235

8

1993

235

13

1993

375

USS/Kobe

Lorain

3

1994

315

1

Injection rate; P is projected; all others are average rates during 1995.

2

Plant based on granular-coal injection.

Attachment 9—See How a Blast Furnace Works, AISI

The attachment is available at the following Web site,

http://www.steel.org/AM/Template.cfm?Section=Home&template=/CM/HTMLDisplay.cfm&ContentID=12305

Attachment 10—Ironmaking Process Alternative Screening Study—Volume I, Summary Report, Lockwood Greene study for the Department of Energy (Oct. 2000)

The attachment is available at the following Web site,

http://www.ornl.gov/~webworks/cppr/y2001/rpt/122325.pdf

Attachment 11—ISG to Repair, Restart Second Blast Furnace at Weirton Unit, American Metal Market (July 12, 2004)

The attachment is available at the following Web site,

http://www.findarticles.com/p/articles/mi_m3MKT/is_28-1_112/ai_n6106694.

Attachment 12—Mittal Steel USA Works to Restore Furnace at Sparrows Point, PRNewswire (July 14, 2006)

The attachment is available at the following Web site,

http://www.mittalsteel.com/NR/rdonlyres/20253936-859A-42A8-8DEC-DBC284FDFB6A/1161/LFurnacerecoveryNR071406.pdf.

Attachment 13—Ispat Inland Accelerates Maintenance Outages, Ispat Inland Press Release (March 7, 2005)

The attachment is available at the following Web site,

http://metalsplace.com/metalsnews/?a=942

Attachment 14—Weirton Workers Buyout from Online NewsHour, September 23, 1983

The attachment is available at the following Web site,

http://www.pbs.org/newshour/bb/business/july-dec83/steel_9-23-83.html.

Attachment 15—High Production Costs Hamper AK Steel's Middletown Works, Steel Business Briefing (Aug. 10, 2006)

High Production Costs Hamper AK Steel's Middletown Works

Thursday, 10 August 2006

AK Steel, trying to lower its labour costs, is pointing to a year-old analyst's report that says slab-making costs at its flagship Middletown, Ohio works are nearly the highest on the globe, Steel Business Briefing has learned.

In a communiqué sent out earlier this week, AK says a report authored by World Steel Dynamics' Peter Marcus, rates Middletown 147th out of 151 slab mills in terms of cost per ton of slab. The steelmaker is attempting to illustrate that its labour costs have to come down in order for the plant to be competitive, not only in North America but throughout the globe.

An AK spokesman tells SBB, however, “We're not saying all of that

is employment” costs. He declined to discuss what the works' per-ton slab production costs are.

Steel industry analyst Charles Bradford says AK likely has a

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