S&P Equity Research Sees Continued Consolidation in the Steel Industry

Singapore, August 01, 2006.

Despite Mittal Steel's acquisition of Arcelor, Standard & Poor's Equity Research Services sees the global steel industry further consolidating over the next several years. These and other findings are available in a semi-annual report on the metals industry, Metals: Industrials Industry Survey, published by Standard & Poor's, a leading provider of independent investment research.

Standard & Poor's Equity Research sees the following companies as potential acquisition candidates: Commercial Metals (NYSE: CMC, $22.04), Quanex Corp. (NYSE: NX $36.35) and Steel Dynamics (NASDAQ: STLD, $57.91). In our opinion, Commercial Metals has attractive assets in steel manufacturing, steel fabrication and scrap recycling. Quanex appears attractive for its strong market position in engineered steel bar and its ample free cash flow. Steel Dynamics has low-cost steel-making operations and a diversified product mix serving the automotive, distributor and non-residential construction markets.

There are several companies in this industry that, we believe, have the financial wherewithal to make acquisitions. According to Standard & Poor's Equity Research, the most likely acquirers would be Nucor Corp. (NYSE: NUE, $51.60) and U.S. Steel (NYSE: X, $62.48). Both of these companies may be looking to improve and expand their capabilities in certain markets.

"Sharply rising costs for raw materials such as iron ore and ferrous scrap are creating pressure for companies to merge. Steel producers have to become larger in order to have greater clout to obtain more favourable contracts from the iron ore miners. Also, larger companies would have the greater financial strength required to engage directly in iron ore mining or manufacture substitutes for ferrous scrap," said Leo Larkin, Senior Metals and Mining Analyst, Standard & Poor's Equity Research Services. "The imperative to reduce raw material costs will, in our opinion, result in further industry consolidation."

Standard & Poor's Industry Surveys provide a broad and fundamental overview of each industry's structure, its recent performance, and an analysis of trends that are expected to influence it in the future. Each Survey is organized into the following sections: Current Environment, Industry Profile / Industry Trends, How the Industry Operates, Key Industry Ratios and Statistics, How to Analyse a Company, Industry References, Comparative Company Analysis, and a Glossary of Terms used in that industry. Both text and data are provided, as are references to additional sources of industry information. Two surveys on each industry are published each year.

Concluded.

---