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									                                                            MORGAN            STANLEY              RESEARCH
                                                            NORTH         AMERICA


                                                            Morgan Stanley & Co. Incorporated   Mark Liinamaa
                                                                                                Mark.Liinamaa@morganstanley.com
                                                                                                +1 (1)212 761 3537

                                                                                                Evan L Kurtz
                                                                                                Evan.Kurtz@morganstanley.com
                                                                                                +1 (1)212 761 7583

                                                                                                Paretosh Misra, Ph.D
February 8, 2010                                                                                Paretosh.Misra@morganstanley.com
                                                                                                +1 (1)212 761 3590


Metals & Mining Call                                                                            Wes Sconce
                                                                                                Wes.Sconce@morganstanley.com
                                                                                                +1 (1)212 761 6004

Macro Concerns
                                                            Recent Reports
Overshadow Industry Trends                                  Title                                                                  Date
                                                            US Steel Corporation: Expectations                          Jan 28, 2010
                                                            Resetting After Q1 Guidance: Worth A Look
Stocks have corrected on macro concerns. The
sell-off of risky assets intensified this past week on      Global Metals Playbook - 1Q10: Gathering                    Jan 13, 2010
concerns about EU sovereign defaults. Nervous               Momentum
investors bid up the dollar, punishing commodities and
                                                            Nonferrous Metals & Mining: Revising                        Jan 12, 2010
commodity linked equities. However, key fundamental         Estimates for AA and FCX on Metal Price
data affecting US metals and mining equities are still      Outlook

improving. EM growth is still tracking well; MS China       Arch Coal Inc.: Perceived Shortcomings                      Jan 11, 2010
Economist, Qing Wang, raised his 2010 GDP estimate          Becoming Strengths; OW
to 11% from 10%. Leading indicators in developed
                                                            Cloud Peak Energy Inc.: Thermal Coal Value                 Dec 30, 2009
economies are improving, and companies are reporting        Play; Bullish PRB; Overweight
higher backlogs.
                                                            Alcoa Inc.: Recovery, Execution Upside:                    Dec 21, 2009
Waiting for the dust to settle: While it may prove too      Moving to Overweight
soon to rush in, valuations are becoming more attractive
                                                            Americas Gold: Mature Bull Favors                          Dec 17, 2009
in a modest global growth scenario. We believe that as      “Steady-State” Producers
the uncertainty surrounding the resolution of EU fiscal
issues is lifted, and Chinese demand reasserts itself       Key Surprises for 2010 - North America                     Dec 16, 2009
after the Chinese New Year, investors should position
                                                            Consol Energy Inc: Gas Segment Growth                        Dec 9, 2009
themselves for a bounce. Our top picks for playing a        May Be Key to Upside
rebound would be X, ACI and AA.
Metals: Demand risk driven by macro concerns took
their toll on metals prices last week. The XME fell 1.5%,
while DXY rose 0.5%. LME prices fell across the board
with copper down 7.0%, aluminum down 3.7%, zinc
down 4.7% and nickel down 6.1%. LME inventories
were broadly flat with copper almost unchanged.
Steel: STLD reported healthy backlogs and record
flat-rolled production in January. An ISM survey of steel
buyers highlighted that 91.7% of steel buyers expected
an uptick in orders over the next 3 months. Flattish
February scrap prices were in line with expectations.
Coal: China’s harsh winter is easing ahead of the New
Year holidays, and weighing on seaborne thermal coal        Morgan Stanley does and seeks to do business with
prices. Our colleagues on the Asia-Pacific coal team        companies covered in Morgan Stanley Research. As
note from a recent trip that Chinese coal imports could     a result, investors should be aware that the firm may
decline 25-50% in 2010 as global coal prices have           have a conflict of interest that could affect the
recovered to Chinese levels. The two US names we            objectivity of Morgan Stanley Research. Investors
                                                            should consider Morgan Stanley Research as only a
believe are least levered to global coal fundamentals –     single factor in making their investment decision.
ACI and CLD – outperformed last week.
                                                            For analyst certification and other important
                                                            disclosures, refer to the Disclosure Section,
                                                            located at the end of this report.
                                                                                                                           MORGAN                                                                STANLEY                  RESEARCH

                                                                                                                           February 8, 2010
                                                                                                                           Metals & Mining Call




Metals and Mining Call
Metals                                                                                                                     peak around the same time frame this year. We saw a slight
                                                                                                                           decrease in the 13 week moving average of global inventory
                                                                                                                           build, which fell from 13kt last week to 12kt this week.
KEY INDICATORS
LME base complex ended another week lower                                                                                  Exhibit 2

Last week, LME prices fell across the board with copper down                                                               LME Copper Inventories Still Rising, Though We See
7.0%, aluminum down 3.7%, zinc down 4.7% and nickel down                                                                   Some Signs of Stabilization
6.1%. LME inventories were broadly flat with mostly up, with                                                                                                             25
                                                                                                                                                                                                                         Rate of change stabilizing further
                                                                                                                                                                                                                                                                                4.40




                                                                                                                            W-o-w Inventory Chg, kt [13-w moving avg.]
copper almost unchanged, zinc up 0.6%, nickel up 1.0% but                                                                                                                20
                                                                                                                                                                                                                                                                                3.90
aluminum fell 0.5%.                                                                                                                                                      15
                                                                                                                                                                                                                                                                                3.40
                                                                                                                                                                         10




                                                                                                                                                                                                                                                                                       Copper Price, $/lb
Shanghai prices fell and inventory rose                                                                                                                                   5
                                                                                                                                                                                                                                                                                2.90

Shanghai copper price fell 7.7% and aluminum fell 0.6%, while                                                                                                             0                                                                                                     2.40
copper inventory rose 12.9% and aluminum rose 6.4%.                                                                                                                       -5
                                                                                                                                                                                                                                                                                1.90
                                                                                                                                                                         -10
Investors have shifted focus back to Macro concerns: Last                                                                                                                                                                                                                       1.40
                                                                                                                                                                         -15
week, XME fell 1.5%, while DXY rose 0.5%. Throughout                                                                                                                                             Copper Inv Chg (13-week moving average)                                        0.90
                                                                                                                                                                         -20
December and January, the indices moved in tandem,                                                                                                                                               Copper Price
                                                                                                                                                                         -25                                                                                                    0.40
underscoring investor’s faith in an economic recovery. With the
                                                                                                                                                                               Jan-06



                                                                                                                                                                                        Jul-06



                                                                                                                                                                                                       Jan-07



                                                                                                                                                                                                                Jul-07



                                                                                                                                                                                                                              Jan-08



                                                                                                                                                                                                                                       Jul-08



                                                                                                                                                                                                                                                  Jan-09



                                                                                                                                                                                                                                                              Jul-09



                                                                                                                                                                                                                                                                       Jan-10
Greece crisis unfolding further, investors seem to have started
questioning the recovery once again.                                                                                       Source: Bloomberg, Morgan Stanley Research


Copper leads the pack lower. Copper fell for the 4th straight                                                              Exhibit 3
week on dollar strength and Chinese concerns, and lost 7% in                                                               LME Inventory Summary
the week. Aluminum ended the week lower 3.7%.                                                                                                                         Copper                                                                    Aluminum      Zinc  Nickel
                                                                                                                                              2009 Market Size, kT 17,917                                                                          35,020  10,516   1,264
                                                                                                                                                        Inventory, T 541,150                                                                    4,587,675 499,800 166,386
Exhibit 1
                                                                                                                                       Change in Inventory, WoW%        0.0%                                                                        -0.5%    0.6%    1.0%
Investor concern has again shifted to Dollar from                                                                               Inventory as weeks of Consumption        1.6                                                                          6.8      2.5     6.8
                                                                                                                                              Canceled Warrants, T     3,800                                                                      251,600   3,600   2,280
Improving Macro, DXY Correlation turned Negative                                                                               Canceled Warrants/Mkt Size, x1000        0.21                                                                         7.18    0.34    1.80
                                            80%                                                                82           Trailing 13 week Inventory Chg, T/week 11,967                                                                           3,506   5,671   2,794
 Running Correlation between XME and DXY




                                                                                                                             Inventory Chg rate/Market Size, x1000      0.67                                                                         0.10    0.54    2.21
                                            60%                                                                81
                                            40%                                                                            Source: Bloomberg, Morgan Stanley Research
                                                                                                               80
                                            20%
                                                                                                               79
                                             0%
                                                                                                                     DXY




                                                                                                               78
                                            -20%
                                                                                                               77
                                                                                                                           Gold
                                            -40%
                                                                                                               76
                                            -60%
                                                                                                               75
                                                                                                                           KEY INDICATORS
                                            -80%

                                           -100%                                                                74         Spot gold fell 2.6% to $1054 per oz
                                                5-Jun   5-Aug                5-Oct               5-Dec      5-Feb
                                                          XME - DXY Trailing 50 days Correlation      DXY
                                                                                                                           10 yr Break-even yield rose 2 bps.
Source: Company data, Morgan Stanley Research                                                                              DXY rose 0.5% WoW.
Chinese copper inventory soared this week: An increase of                                                                  Ongoing fiscal concerns around Greece further weakened the
13kt in SHFE was partially explained by a decrease of 6.8kt on                                                             Euro this week, with the Dollar gaining 1.4%. We saw a slight
from the LME Asian warehouses. Asian cancelled warrants fell                                                               decrease in the 13-week moving average rate of LME inventory
but Shanghai copper premium stayed above $100/T. We                                                                        build, which fell from 13kt last week to 12kt this week. Gold
expect to move into a seasonally strong period after the                                                                   holdings in SPDR GLD ETF have fallen 2.5% from their recent
Chinese New Year. Over the last three years, the rate of                                                                   peak, and fell 0.6% last week. Thursday’s $50 fall in gold was
increase of LME inventories peaked in the early 1Q and if                                                                  the biggest one-day loss since Oct 08.
OECD recovery remains on track, we expect inventories to




                                                                                                                                                                                                                                                                                                            2
                                                                                                                                                                                                                                                          MORGAN                               STANLEY             RESEARCH

                                                                                                                                                                                                                                                          February 8, 2010
                                                                                                                                                                                                                                                          Metals & Mining Call




Exhibit 4
Dollar is Weighing on Gold…..
                                                                                                                                                                                                                                                          Coal
                1250                                                                                                                                                                                                      74

                1200
                                          Gold                                                                                                                                                                                                            KEY INDICATORS
                                          DXY (Inverted Scale)                                                                                                                                                            76

                1150
                                                                                                                                                                                                                          78                              US thermal coal prices (versus last week)
                1100
                                                                                                                                                                                                                          80                              12M fwd CAPP (NYMEX) @ $62.73/ton (flat)
   Gold, $/oz




                1050                                                                                                                                                                                                                                      12M fwd PRB (NYMEX) @ $12.30/ton (+1%)




                                                                                                                                                                                                                                                 DXY
                                                                                                                                                                                                                          82
                1000                                                                                                                                                                                                                                      Natural Gas Spot (NYMEX) @ $5.52 Mcf (+7%)
                                                                                                                                                                                                                          84
                 950

                 900
                                                                                                                                                                                                                          86                              International coal prices (versus last week)
                 850                                                                                                                                                                                                      88                              Australian thermal @ $91/t fob (-7%)
                 800                                                                                                                                                                                                      90
                                                                                                                                                                                                                                                          Hard coking coal @ $200/t fob Australia
                                               May-09
                       Mar-09




                                                                                                                                                      Nov-09
                                 Apr-09




                                                           Jun-09


                                                                         Jul-09


                                                                                             Aug-09


                                                                                                                Sep-09


                                                                                                                                   Oct-09




                                                                                                                                                                         Dec-09


                                                                                                                                                                                             Jan-10


                                                                                                                                                                                                                 Feb-10
                                                                                                                                                                                                                                                          Exhibit 7
                                                                                                                                                                                                                                                          PRB Prices Continue to Trend Higher vs CAPP
Source: Company data, Morgan Stanley Research
                                                                                                                                                                                                                                                                                $75            CAPP Prompt (Left Axis)                                $11
                                                                                                                                                                                                                                                                                               PRB Prompt (Right Axis)                                $10
                                                                                                                                                                                                                                                                                $70
                                                                                                                                                                                                                                                                                               Nat Gas Spot (Right Axis)                              $9

                                                                                                                                                                                                                                                              PRB 8800 Prices
                                                                                                                                                                                                                                                                                $65
                                                                                                                                                                                                                                                                                                                                                      $8
Exhibit 5                                                                                                                                                                                                                                                                       $60                                                                   $7
…….Inflation Expectations are Near Stable….                                                                                                                                                                                                                                     $55                                                                   $6
                                                                                                                                                                                                                                                                                                                                                      $5
                1250                                                                                                                                                                                                      2.5                                                   $50
                                                                                                                                                                                                                                                                                                                                                      $4
                                           Gold
                1200                                                                                                                                                                                                                                                            $45
                                           10-Year Breakeven Yield                                                                                                                                                                                                                                                                                    $3
                1150                                                                                                                                                                                                                                                            $40                                                                   $2
                                                                                                                                                                                                                          2
                                                                                                                                                                                                                                10-Year Breakeven Yield




                                                                                                                                                                                                                                                                                      Sep-09




                                                                                                                                                                                                                                                                                                   Oct-09




                                                                                                                                                                                                                                                                                                                 Nov-09




                                                                                                                                                                                                                                                                                                                           Dec-09




                                                                                                                                                                                                                                                                                                                                    Jan-10




                                                                                                                                                                                                                                                                                                                                             Feb-10
                1100
 Gold, $/oz




                1050
                                                                                                                                                                                                                          1.5
                1000                                                                                                                                                                                                                                      Source: Bloomberg, Morgan Stanley Research
                 950

                 900
                                                                                                                                                                                                                          1
                                                                                                                                                                                                                                                          The group traded off last week on emerging market demand
                 850                                                                                                                                                                                                                                      concerns and a sharp decline in Asia-Pacific prices. China’s
                 800                                                                                                                                                                                                      0.5                             harsh winter has begun to ease just ahead of the New Year
                                               May-09
                       Mar-09




                                                                                                                                                     Nov-09
                                 Apr-09




                                                           Jun-09


                                                                        Jul-09


                                                                                         Aug-09


                                                                                                               Sep-09


                                                                                                                                  Oct-09




                                                                                                                                                                        Dec-09


                                                                                                                                                                                           Jan-10


                                                                                                                                                                                                               Feb-10




                                                                                                                                                                                                                                                          holidays, creating uncertainty over coal import demand. The
                                                                                                                                                                                                                                                          two US names we believe are least levered to international coal
Source: Company data, Morgan Stanley Research
                                                                                                                                                                                                                                                          markets – ACI and CLD – outperformed last week.
                                                                                                                                                                                                                                                          Chinese coal imports potentially declining in 2010?
                                                                                                                                                                                                                                                          Highlights from our Asia-Pacific Coal research team’s recent
Exhibit 6
                                                                                                                                                                                                                                                          meetings with Chinese coal miners and power producers:
…. and Fund inflows into Gold are Shrinking
                1250                                                                                                                                                                                           380000                                     •                     2010 Chinese import volumes could decline to 50-80 mmt
                                                 Gold                             GLD ETF Shares
                1200                                                                                                                                                                                                                                                            from 105 mmt in 2009. The decline would likely come in
                                                                                                                                                                                                               370000
                1150                                                                                                                                                                                                                                                            thermal coal, where supply is less challenged. Suppliers
                1100                                                                                                                                                                                                                                                            believe China’s strong thermal coal import volumes in
                                                                                                                                                                                                                                  GLD ETF Shares




                                                                                                                                                                                                               360000
 Gold, $/oz




                1050                                                                                                                                                                                                                                                            2009 reflected a significant arbitrage between prices for
                1000
                                                                                                                                                                                                               350000
                                                                                                                                                                                                                                                                                domestic coal versus imported material, rather than
                950                                                                                                                                                                                                                                                             structural shortages of thermal coal.
                900
                                                                                                                                                                                                                                                          •
                                                                                                                                                                                                               340000
                                                                                                                                                                                                                                                                                Despite less certainty in Chinese steel demand than
                850
                                                                                                                                                                                                                                                                                electric power, 2010 coking coal imports are expected to
                800                                                                                                                                                                                            330000
                                                                                                                                                                                                                                                                                be consistent with 2009 levels due to structural shortages
                                             May-09
                       Mar-09




                                                                                                                                            Nov-09
                                Apr-09




                                                        Jun-09


                                                                    Jul-09


                                                                                    Aug-09


                                                                                                      Sep-09


                                                                                                                         Oct-09




                                                                                                                                                               Dec-09


                                                                                                                                                                                  Jan-10


                                                                                                                                                                                                      Feb-10




                                                                                                                                                                                                                                                                                in the domestic met coal market.
Source: Company data, Morgan Stanley Research
                                                                                                                                                                                                                                                          •                     Concerns over Chinese thermal coal oversupply in 2011
                                                                                                                                                                                                                                                                                as the sector completes its consolidation phase. Our




                                                                                                                                                                                                                                                                                                                                                       3
                                                                                                                                                                                                                                   MORGAN                STANLEY             RESEARCH

                                                                                                                                                                                                                                   February 8, 2010
                                                                                                                                                                                                                                   Metals & Mining Call




            Chinese coal team’s base case sees a balanced market in                                                                                                                                                                Exhibit 9

            2011 and a small risk of oversupply in 2012.                                                                                                                                                                           STLD – Raising Q1; Leaving 2010 and 2011 Unchanged
                                                                                                                                                                                                                                   ($ Millions, Except Per Share Data)
•           In separate meetings with independent power producers,                                                                                                                                                                                                1Q 2010 Est.          FY2010 Est.           FY2011 Est.

            Wee-kiat notes that Inner Mongolia may be considering an                                                                                                                                                                                             Old         New       Old         New       Old         New
                                                                                                                                                                                                                                     Steel Volumes               1,295       1,299     5,381       5,230     5,662       5,659
            industry overhaul similar to that of the Shanxi province in                                                                                                                                                              Blended Price                 659        725       682           750      756          817
            1H09. Last year Inner Mongolia surpassed Shanxi as                                                                                                                                                                     Sales                         1,521       1,617     6,217       6,709     7,260       8,212
            China’s largest coal-producing province.                                                                                                                                                                                 Steel Operations              854        942      3,675       3,924     4,290       4,624
                                                                                                                                                                                                                                     Steel Fabrication              47           49     178           163      209          186
                                                                                                                                                                                                                                     Scrap & Scrap Sub.            801        820      3,107       3,435     3,646       4,424
                                                                                                                                                                                                                                     Other                          31           31     122           122      126          122
                                                                                                                                                                                                                                     Eliminations                 (212)       (225)     (866)       (934)    (1,011)     (1,144)
Steel
                                                                                                                                                                                                                                   Gross Margin                  12.8%       15.0%     15.7%       15.1%     16.3%       15.1%
                                                                                                                                                                                                                                   SG&A % of Sales                4.0%        4.0%      4.0%        4.0%      4.0%        4.0%
KEY INDICATORS                                                                                                                                                                                                                     Operating Profit                134        178       728           743      893          910
                                                                                                                                                                                                                                     Steel Operations              116        163       697           651      788          791
US Industry Operating Rates Rise                                                                                                                                                                                                     Steel Fabrication                 (2)       (0)         3           8      18           22
Last week, US operating rates rose to 66.9% from 65.6%, the                                                                                                                                                                          Scrap & Scrap Sub.             39           26     103           127      161          172
                                                                                                                                                                                                                                     Eliminations & Other           (19)       (11)      (75)         (43)      (74)        (75)
highest level recorded since the week ending Nov. 1 2008.                                                                                                                                                                          EBIT Margin                    8.8%       11.0%     11.7%       11.1%     12.3%       11.1%

US HRC Futures Rise                                                                                                                                                                                                                Net Interest Expense             (33)       (33)     (130)       (132)     (128)       (130)
Front month US HRC rose to $595/t from $570 last week                                                                                                                                                                              Other Income                        (1)       (1)         (2)       (4)         (2)       (4)
                                                                                                                                                                                                                                   Taxes                            39           55     228           234      292          298
Prices Stable in China                                                                                                                                                                                                             Tax Rate                        38%        38%       38%           38%      38%          38%
                                                                                                                                                                                                                                   Net Income                       65           92     380           389      484          494
Shanghai hot-rolled coil prices end the week flat for the second
week in a row.                                                                                                                                                                                                                     EPS (Pro Forma)               $0.30       $0.40     $1.70       $1.70     $2.15       $2.15
                                                                                                                                                                                                                                   EPS (As Reported)             $0.30       $0.40     $1.70       $1.70     $2.15       $2.15
Exhibit 8
                                                                                                                                                                                                                                   Source: Company data, Morgan Stanley Research
Daily US and Chinese HRC Prices

            5,000                                                                                                                                                                                              650
                                                                                                                                                                                                                                   Bumping our Q1 estimate, our long-term outlook remains
                                      Shanghai HRC Price (RMB/t)                                                             Front Month US HRC ($/s. ton)
                                                                                                                                                                                                                                   unchanged. While the company’s guidance for “stronger
                                                                                                                                                                                                               600
            4,500
                                                                                                                                                                                                                                   profitability in both steel operating and metal recycling” is
                                                                                                                                                                                                               550
                                                                                                                                                                                                                                   somewhat vague, we believe FIFO reporting, rising steel prices
                                                                                                                                                                                                                     $/short ton




            4,000
    RMB/t




                                                                                                                                                                                                               500                 and volumes and rising scrap prices and volumes could
            3,500
                                                                                                                                                                                                               450                 provide Q1 earnings of $0.40, up from our previous estimate of
            3,000                                                                                                                                                                                                                  $0.30. We are leaving our well above consensus full year 2010
                                                                                                                                                                                                               400
                                                                                                                                                                                                                                   and 2011 estimates of $1.70 and $2.35 unchanged.
            2,500                                                                                                                                                                                              350
                    1/5/09
                             2/4/09
                                      2/24/09
                                                3/16/09
                                                          4/3/09
                                                                   4/24/09
                                                                             5/15/09
                                                                                       6/8/09
                                                                                                6/26/09
                                                                                                          7/17/09
                                                                                                                    8/6/09
                                                                                                                             8/26/09
                                                                                                                                       9/15/09
                                                                                                                                                 10/16/09


                                                                                                                                                                      11/25/09
                                                                                                                                                                                 12/15/09
                                                                                                                                                                                            1/5/10
                                                                                                                                                                                                     1/25/10
                                                                                                                                                            11/5/09




                                                                                                                                                                                                                                   Imports likely to climb in January. In January, steel import
                                                                                                                                                                                                                                   licenses rose 12%, as reported by the Import Trade
Source: Bloomberg, Morgan Stanley Research                                                                                                                                                                                         Administration. However, the uptick was primarily driven by
                                                                                                                                                                                                                                   semi-finished products, which could indicate that there is a
STLD – Leaving 2010 and 2011 estimates unchanged                                                                                                                                                                                   need to bring back more idled blast furnaces in the US. Import
Key takeaways from 4Q09 earnings call:                                                                                                                                                                                             licenses, excluding semi-finished products, were up only 2%,
                                                                                                                                                                                                                                   indicating that domestic steel producers are pricing material in
•           The company’s flat-rolled mill set a production record in                                                                                                                                                              a competitive manner. Notably, OCTG import licenses rose by
            January as order rates remained robust.                                                                                                                                                                                32k tons, while negative for inventory destocking, the rise does
•           The company’s struggling structural mill saw an uptick in                                                                                                                                                              indicate that market is improving.
            backlogs, albeit from low levels.
                                                                                                                                                                                                                                   Initial February scrap prices are roughly in line with
•           The Mesabi nugget plant is producing very high quality                                                                                                                                                                 expectations. According to a story in AMM, obsolete scrap
            iron units and the company expect to ramp the new battery                                                                                                                                                              prices were flat in February in the key Midwest and Southern
            to 50% - 60% operating rates by the summer.                                                                                                                                                                            region, although they were down 10/t on the East coast. Prime
                                                                                                                                                                                                                                   scrap grades were up $10/t - $30/t due to tight supply. While
                                                                                                                                                                                                                                   prices were slightly higher than expected for prime grades, we



                                                                                                                                                                                                                                                                                                                             4
                                                                   Change in Jan Import Licenses (k tons)




                                                                               -30
                                                                                     -10
                                                                                           10
                                                                                                  30
                                                                                                        50
                                                                                                              70
                                                                                                                   90
                                                                                                                        110
                                                                                                                              130
                                                                                                                                    150
                                                                                                                                                                                                                   Exhibit 10
                                                                Wire Rods
                                                                       (20.6)

                                                       Sheets Cold Rolled
                                                                       (19.4)

                                                            Plates in Coils (9.9)

                                                       Plates Cut Lengths        (3.6)

                                                        Sheets Hot Rolled        (3.6)




    Source: ITA, Morgan Stanley Research
                                                                  Tin Plate      (2.3)

                                                            Tin Free Steel       (1.8)

                                                           Bars-Hot rolled       (1.5)

                                                            Rails All Other      (1.2)

                                                         Strip-Cold Rolled       (0.9)

                                                               Wire Drawn        (0.8)

                                                               Black Plate       (0.7)

                                                                Tool Steel       (0.4)
                                                                                                                                                                                                                                and would not expect it to affect the stocks materially.




                                                        Bars-Light Shaped        (0.4)

                                              Pipe & Tubing Nonclassified        (0.4)
                                                                                                                                                                                                                                don't think the outcome deviates too much from expectations,




                                                  Sheets & Strip-Electrical      (0.3)

                                                          Pressure Tubing        (0.3)

                                                     Railroad Accessories                  (0.1)

                                                       Bars-Cold Finished                  (0.0)

                                                    Structural Pipe & Tube                 0.1
                                                                                                                                                                                                                                                                                                                      MORGAN




                                                            Pipe For Piling                0.2
                                                                                                                                                                                                                                                                                               February 8, 2010




                                                           Strip-Hot Rolled                0.5
                                                                                                                                                                                                                                                                                               Metals & Mining Call




                                                                                                                                          Imports Licenses for Semi Finished Products Were Up Sharply in January




                                             Ingots and Steel for Castings                 0.7

                                                               Steel Piling                1.5
                                                                                                                                                                                                                                                                                                                      STANLEY




                                                       Mechanical Tubing                   2.3

                                           Sheets & Strip All Other Metallic               2.4

                                           Sheets & Strip Galv Hot Dipped                  3.2

                                                          Bars-Reinforcing                 3.5

                                            Sheets & Strip Galv Electrolyt                 3.9
                                                                                                                                                                                                                                                                                                                      RESEARCH




                                                            Standard Pipe                   4.5

                                                 Structural Shapes Heavy                    7.9

                                                                 Line Pipe                      12.8

                                                            Rails Standard                      13.0

                                                        Oil Country Goods                              32.8

                                                 Blooms, Billets and Slabs                                                    122.8




5
                                                                                                     MORGAN           STANLEY          RESEARCH

                                                                                                     February 8, 2010
                                                                                                     Metals & Mining Call




Exhibit 11
Metals & Mining Catalyst Calendar (February)
                                                                                                           EPS For e cast
                                                                                                                                                     Ot h e r Cat aly st s
Dat e           Day         Reg ion      Cat alyst                                      Com p an y        MS         Con s.
                                                                                                                                                (Sp e cif ic Day Un kn ow n )
0 1 -Fe b -10   Monday      Asia ex-Jp   China PMI                                                                            February scrap price (Usually within the first week)
                            N. America   US ISM (10am)
                            N. America   Construction Spending (10am)
                            N. America   Weekly Steel Production

0 2 -Fe b -10   Tuesday     N. America   Motor Vehicle Sales

0 3 -Fe b -10   Wednesday   N. America   Steel Dynamicsl Earnings Release (ATC)            STLD          $0.22       $0.18

0 4 -Fe b -10   Thursday    N. America   Factory Orders (10am)

0 5 -Fe b -10   Friday

0 6 -Fe b -10   Saturday

0 7 -Fe b -10   Sunday

0 8 -Fe b -10   Monday      N. America   Weekly Steel Production

0 9 -Fe b -10   Tuesday

1 0 -Fe b -10   Wednesday   N. America   US Coal Trade Data (December)

1 1 -Fe b -10   Thursday    Asia ex-Jp   China Trade Data

1 2 -Fe b -10   Friday

1 3 -Fe b -10   Saturday

1 4 -Fe b -10   Sunday

1 5 -Fe b -10   Monday      N. America   Weekly Steel Production
                            Asia ex-Jp   China Steel Production Data

1 6 -Fe b -10   Tuesday     N. America   MSCI: Metals Activity Report (Approximate)

1 7 -Fe b -10   Wednesday   N. America   Industrial Production (9:15am)

1 8 -Fe b -10   Thursday    N. America   China Metals Production Data
                            N. America   Barrick Gold Earnings Release                      ABX          $0.58       $0.58
                            Asia ex-Jp   China Coal Imports (Jan total, approx. date)

1 9 -Fe b -10   Friday      Global       World Steel Ass'n: Crude Steel Production

2 0 -Fe b -10   Saturday

2 1 -Fe b -10   Sunday

2 2 -Fe b -10   Monday      N. America   Weekly Steel Production
                            Asia ex-Jp   China Coal Imports (Jan by Grade, approx.)

2 3 -Fe b -10   Tuesday     N. America   Census Bureau: US Steel Imports (10am)
                            N. America   Century Aluminum Earnings Release                 CENX          $0.01       $0.02

2 4 -Fe b -10   Wednesday

2 5 -Fe b -10   Thursday    N. America   Durable Goods (8:30am)
                            N. America   Newmont Mining                                    NEM           $0.69       $0.72

2 6 -Fe b -10   Friday      N. America   Chicago PMI (9:45am)
                            N. America   EIA Electric Power Flash

2 7 -Fe b -10   Saturday

2 8 -Fe b -10   Sunday

Source: Morgan Stanley Research




                                                                                                                                                                                     6
                                                                                                             MORGAN                 STANLEY                    RESEARCH

                                                                                                             February 8, 2010
                                                                                                             Metals & Mining Call




Exhibit 12                                                                                                   Exhibit 13
Last Seven Days’ Performance                                                                                 Year-to Date Performance
                                               S&P 500                                                                                                          S&P 500
                                  KOL ETF                                                                                                        KOL ETF
                                                                             Spot CAPP Coal                                                                                             Spot CAPP Coal
                                                                                    Nat Gas (Henry)                                                            Nat Gas (Henry)
                                                                 Cloud                                                                                           Patriot
                                                             Walter                                                                                                 Arch
  COAL                                                                                                           COAL                                           Cloud
                                                     Arch
                                             Alpha                                                                                                            Alpha
                                      Peabody                                                                                                              Consol
                                      Consol                                                                                                              Peabody
                                 Patriot                                                                                                           Walter

 -20%        -15%         -10%              -5%
                                           Metals Index     0%             5%          10%            15%        -40%        -30%              -20%
                                                                                                                                               Metals Index    -10%              0%   10%          20%

                             Aluminum                                                                                                             Aluminum
                      Absolute Performance (Last 7 Calendar Days, %)                                                                 Absolute Performance (Last 7 Calendar Days, %)
                        Copper                                                                                                                   Copper
  METALS                                                                                                         METALS
                                                                  Freeport                                                                     Freeport
                                                                  Alcoa                                                                  Alcoa
                             Century                                                                               Century

 -20%        -15%         -10%         Steel Index
                                         -5%                0%             5%          10%            15%        -40%        -30%              -20% Index
                                                                                                                                               Steel           -10%              0%   10%          20%
                     Absolute Performance (Last 7 Calendar Days, %)
                                                         Schnitzer                                                                                AK (Last
                                                                                                                                 Absolute PerformanceSteel 7 Calendar Days, %)
                                                                 Cliffs Nat. Res.                                                                 Schnitzer
                                               CMC                                                                                       Cliffs Nat. Res.
 STEEL                                 US Steel                                                                  STEEL                              CMC
                                       AK Steel                                                                                                  Nucor
                                        Nucor                                                                                    Steel Dynamics
                            Steel Dynamics                                                                                          US Steel

 -20%        -15%         -10%
                        Precious Index -5%                  0%             5%          10%            15%      -40%          -30%                          -10%
                                                                                                                                               -20% Precious Index               0%   10%          20%
                                                   Gold                                                                                                                 Gold
                 Absolute Performance (Last 7 Calendar Days, %)                                                                Absolute Performance (Last 7 Calendar Days, %)
                                            USD/EUR                                                                                                            USD/EUR
                                                                    Newmont                                                                                Newmont
  GOLD                                                           Kinross                                           GOLD                              Kinross
                                           Goldcorp                                                                                               Barrick
                                             Barrick                                                                                        Goldcorp

 (20%)       (15%)        (10%)             (5%)            0%             5%          10%            15%      (40%)         (30%)          (20%)              (10%)             0%   10%         20%
                 Absolute Performance (Last 7 Calendar Days, %)                                                                       Absolute Performance (Year to Date, %)

Source: FactSet, Bloomberg, Morgan Stanley Research                                                          Source: FactSet, Bloomberg, Morgan Stanley Research

Exhibit 14
Price Target Methodology & Key Risks
Ticker       Price Target                                                Valuation Methodology                                                                      Key Risks

                             Based on 7.0x 2011e EBITDA, slightly below Peabody's average historical multiple       Risks to our price target include weaker than expected Chinese thermal and met coal
BTU              $46         and at a premium to US producers, which we believe is warranted given the              imports, delayed ramp up of key Australian port and mine expansions, weakness in natural
                             Company's growth potential in Australia and US.                                        gas prices and a more modest recovery in US industrial electricity demand.
                             Based on 6.7x 2011e EBITDA and supported by our DCF and Residual Income                Risks to our price target include: More modest recovery in US industrial electricity demand;
                             valuations. Our target multiple represents a premium to both current peer valuations   weakening demand for US high-vol met coal; slower recovery in mine operating rates;
ACI              $32         as well as our target/fair value multiples on the peer group, and is consistent with   lackluster demand for PRB coal; weak natural gas prices; extended Western Bit longwall
                             Arch's historical trading range.                                                       mine outages; carbon legislation
                             Based on 5.5x 2011e EBITDA and supported by our DCF and Residual Income
                                                                                                                    Risks to our price target include: more modest recovery in US industrial electricity
                             valuations. Our target multiple reflects an adequate discount to peers that, in our
CLD              $19         view, reflects Cloud's ownership overhang, pure-play PRB status and limited near-
                                                                                                                    demand, rising mining and LBA-reserve costs, delays or changes to the in PRB coal
                                                                                                                    leasing process, rail disruptions, and carbon legislation
                             term volume growth expectations
                             Our $58 price target is based on 4.3x EV/EBITDA multiple on our 2011 estimate.         As a high beta name, the stock is vulnerable to a broad market sell-off. Overcapacity in
X                $58         This multiple is conservative when compared to the 5-year median forward               the US market could limit pricing. Imports may tick up as struggling international
                             EV/EBITDA multiple of 4.8x.                                                            competitors attempt to dump steel.
                             Based on 5x 2011e EBITDA (this multiple is consistent with the average historical
                                                                                                                    Risks to our price target include a weaker than expected pickup in manufacturing demand,
STLD             $20         forward multiple for STLD shares), averaged with a DCF analysis, assuming a
                                                                                                                    and a potential resurgance of imports.
                             WACC of 9.7% and a long-term growth rate of 3%.
                             Based on 13x our normalized EPS estimate of $1.70, implying a 4.7% RoA, 50bp            Key risks include the rate of US and global economic growth, potential ali price weakness,
AA               $22         higher than the last 15-year average to give credit for restructuring, capital spending continued cost inflation, a weak USD, idled capacity restarts, and greater-than-expected
                             and cost cutting.                                                                       aluminum production in China.
                                                                                                                   Deflationary concerns dominate investor consideration of gold; broad preference for direct
                             Our $46 Price Target for ABX is based on 13x one-year-forward P/CF multiple,
                                                                                                                   over equity exposure to gold; gold price profile significantly lower than our base case; key
ABX              $46         consistent with ABX’s historical average trading multiple, applied to 2010e cash flow
                                                                                                                   projects required to maintain production outlook are delayed; operating costs rise more
                             from operations per share (CFPS), of $3.60.
                                                                                                                   than expected.

Source: Morgan Stanley Research




                                                                                                                                                                                                               7
                                                                                                                      MORGAN             STANLEY             RESEARCH

                                                                                                                      February 8, 2010
                                                                                                                      Metals & Mining Call




Exhibit 15
North American Metals & Mining Comps Table
                                                             Price                    MS EPS                           Cons EPS                            MS PE                           Cons PE
North America Metals & Mining            Stock Rating
                                                           2/7/2010        2010        2011        2012      2010        2011        2012    2010           2011        2012    2010        2011          2012
  Non-ferrous                                                                                                                                11.2            9.1         8.2    13.2          9.5          8.5
AA      Alcoa                             Overweight        $13.18         $1.00       $1.40      $1.70     $0.92        $1.27       $1.43   13.2            9.4         7.8    14.3         10.4          9.2
CENX Century Aluminum                    Equal-Weight       $11.12         $1.00       $1.20      $1.40     $0.68        $1.08       $1.45   11.2            9.3         7.9    16.3         10.3          7.7
FCX     Freeport-McMoran                 Equal-Weight       $70.23         $7.50       $8.00      $8.00     $7.68        $8.98       $8.27    9.4            8.8         8.8     9.1          7.8          8.5
  Gold                                                                                                                                       20.8           19.9        19.1    21.2         17.0         17.3
ABX     Barrick Gold                      Overweight        $35.83         $2.80       $2.70      $2.50     $2.64        $2.79       $2.40   12.8           13.3        14.3    13.6         12.9         14.9
GG      Goldcorp Inc.                    Equal-Weight       $35.51         $1.25       $1.30      $1.50     $1.21        $1.64       $1.79   28.4           27.4        23.7    29.3         21.6         19.9
KGC Kinross Gold Corp.                   Equal-Weight       $17.18         $0.62       $0.70      $0.80     $0.64        $0.79       $0.88   27.5           24.4        21.6    26.9         21.6         19.5
NEM Newmont Mining                       Equal-Weight       $46.23         $3.20       $3.15      $2.75     $3.10        $3.86       $3.12   14.4           14.7        16.8    14.9         12.0         14.8
  Coal                                                                                                                                       16.0           10.0         9.5    14.4         13.4          8.4
ANR     Alpha Natural Res.               Equal-Weight       $41.17        $2.97        $3.77      $3.90     $3.44        $4.42       $5.87   13.9           10.9        10.6    12.0          9.3          7.0
ACI     Arch Coal                         Overweight        $21.08         $0.75       $2.50      $4.00     $0.84        $1.73       $2.55   28.1            8.4         5.3    25.0         12.2          8.3
CLD     Cloud Peak                        Overweight        $14.31         $1.10        $1.25     $1.79      $1.28       $1.24        NA     13.0           11.5         8.0    11.2         11.5          NA
CNX     Consol Energy                    Equal-Weight       $46.05         $3.36        $4.31      NA       $3.34        $4.72       $5.85   13.7           10.7         NA     13.8          9.8          7.9
PCX     Patriot                          Underweight        $14.95        ($1.15)      ($0.20)    $1.05     ($1.09)      $0.45       $1.57    NM             NM         14.2     NM          32.9          9.5
BTU     Peabody                           Overweight        $41.91         $2.70       $4.10       NA       $2.76        $3.94       $4.36   15.5           10.2         NA     15.2         10.6          9.6
WLT Walter Industries                    Equal-Weight       $67.54         $5.84        $8.01      NA        $7.56       $9.18       $8.16   11.6            8.4         NA      8.9          7.4          8.3
  Steel & Ferrous                                                                                                                            17.5            8.0         6.6    15.3          9.3          8.1
AKS     AK Steel                         Equal-Weight       $20.43         $1.50       $3.05      $4.10     $1.43        $2.26       $2.89   13.6            6.7         5.0    14.3          9.0          7.1
CLF     Cliffs Natural Resources         Equal-Weight       $41.69         $2.62       $4.77       NA       $3.55        $4.98       $4.31   15.9            8.7         NA     11.8          8.4          9.7
CMC Commercial Metals                    Equal-Weight       $13.88        ($0.05)      $2.10      $2.95     ($0.10)      $1.54       $2.23    NM             6.6         4.7     NM           9.0          6.2
NUE     Nucor                            Equal-Weight       $40.46         $2.05       $4.05      $5.30     $2.02        $3.73       $4.80   19.8           10.0         7.6    20.0         10.8          8.4
SCHN Schnitzer Steel                     Underweight        $43.11         $2.50       $4.00      $4.20     $2.30        $3.98       $4.53   17.2           10.8        10.3    18.7         10.8          9.5
STLD Steel Dynamics                       Overweight        $14.99        $1.70 e     $2.15 e      NA       $1.29        $1.95       $2.23    8.8            7.0         NA     11.6          7.7          6.7
X       US Steel                          Overweight        $44.78         $1.50       $7.00      $8.50     $0.43        $4.80       $4.91   29.9            6.4         5.3     NM           9.3          9.1

                                                                                     MS EBITDA                        Cons EBITDA                   MS Current EV/EBITDA             Cons Current EV/EBITDA
North America Metals & Mining            Stock Rating     Current EV
                                                                             2010      2011        2012      2010        2011        2012    2010           2011         2012   2010          2011        2012
  Non-ferrous                                                                                                                                 6.1            5.6          5.1    6.9           6.6          5.2
AA      Alcoa                             Overweight        27,948          4031       4564       4826      3412         3984        4317     6.9            6.1          5.8    8.2           7.0          6.5
CENX Century Aluminum                    Equal-Weight         1,407          207       221         274       169          161         283     6.8            6.4          5.1    8.3           8.8         5.0
FCX     Freeport-McMoran                 Equal-Weight        38,986         8630       9016       8977      9287         10065       9631     4.5            4.3          4.3    4.2           3.9          4.0
  Gold                                                                                                                                        8.7            8.6          8.4    9.3           8.4          9.1
ABX     Barrick Gold                      Overweight        39,548          5286       5075       4910      5147         5223        4220     7.5            7.8          8.1    7.7           7.6         9.4
GG      Goldcorp Inc.                    Equal-Weight       26,206          2023       2178       2391      1954         2389        2466    13.0           12.0         11.0   13.4          11.0         10.6
KGC Kinross Gold Corp.                   Equal-Weight       12,208          1299       1315       1388      1225         1252        1260     9.4            9.3          8.8   10.0           9.8          9.7
NEM Newmont Mining                       Equal-Weight       26,243          5241       4899       4647      4311         4892        4019     5.0            5.4          5.6    6.1           5.4         6.5
  Coal                                                                                                                                        7.3            5.6          4.3    7.8           5.7          5.0
ANR     Alpha Natural Res.               Equal-Weight        5,710           896       1022       1056      1002         1171        1427     6.4            5.6          5.4    5.7           4.9         4.0
ACI     Arch Coal                         Overweight          5,283          651       1040       1409       661          871        1079     8.1            5.1          3.7    8.0           6.1          4.9
CLD     Cloud Peak                        Overweight          1,243          265        283        344       284          284          NA     4.7            4.4          3.6    4.4           4.4          NA
CNX     Consol Energy                    Equal-Weight        11,406         1684       2004         NA      1402         1820        2170     6.8            5.7          NA     8.1           6.3         5.3
PCX     Patriot                           Underweight        2,210           225        345        478       160          328         501     9.8            6.4          4.6   13.8           6.7          4.4
BTU     Peabody                           Overweight         13,743         1683       2149         NA      1623         2068        2277     8.2            6.4          NA     8.5           6.6          6.0
WLT Walter Industries                    Equal-Weight         4,003          572        736         NA       686          808         711     7.0            5.4          NA     5.8           5.0          5.6
  Steel & Ferrous                                                                                                                             7.7            4.7          4.1    8.6           5.3          4.8
AKS     AK Steel                         Equal-Weight         3,579          652        913        990       484          639         757     5.5            3.9          3.6    7.4           5.6          4.7
CLF     Cliffs Natural Resources         Equal-Weight        5,809           731       1117         NA      928          1179        1010     7.9            5.2          NA     6.3           4.9         5.8
CMC Commercial Metals                    Equal-Weight         2,378          245        639        792       253          524         649     9.7            3.7          3.0    9.4           4.5          3.7
NUE     Nucor                            Equal-Weight       13,782          1680       2508       2944      1738         2618        3181     8.2            5.5          4.7    7.9           5.3          4.3
SCHN Schnitzer Steel                      Underweight        1,285           175        244        253       165          244         265     7.3            5.3          5.1    7.8           5.3         4.9
STLD Steel Dynamics                       Overweight          5,540        961 e      1,135 e       NA       851         1116        1225     5.8            4.9          NA     6.5           5.0          4.5
X       US Steel                          Overweight         11,907         1232       2544       2769       806         1875        2088     9.7            4.7          4.3   14.8           6.4          5.7
Enterprise value and MS EBITDA estimates shown are adjusted for pension and OPEB
                                          Net Debt to       P/Tang.                  MS FCF/Shr                       Cons FCF/Shr                      MS FCF Yield                    Cons FCF Yield
North America Metals & Mining
                                         Cap, 2009YE     Book 4Q09e          2010       2011       2012      2010         2011       2012     2010         2011         2012    2010        2011          2012
  Non-ferrous                                                                                                                                 11%           14%         15%     15%          15%          19%
AA      Alcoa                               35% e              1.8         $1.55       $2.12      $2.02     $2.42        $3.16       $3.00    12%           16%         15%     18%          24%          23%
CENX Century Aluminum                       17% e              1.0         $1.35       $1.70      $2.18     $1.67        $1.09       $2.56    12%           15%         20%     15%          10%          23%
FCX     Freeport-McMoran                    45% e              5.7          $5.34      $7.59      $7.42     $7.77        $8.41       $7.93     8%           11%         11%     11%          12%          11%
  Gold                                                                                                                                         3%            4%          3%      4%           6%           4%
ABX     Barrick Gold                        19% e              3.5         $1.96       $2.24      $2.55     $1.50        $1.70       $1.23     5%            6%          7%      4%           5%           3%
GG      Goldcorp Inc.                        0% e              1.8         ($0.02)     $0.85      $1.47     $0.12        $1.22       $1.25    (0%)           2%          4%      0%           3%           4%
KGC Kinross Gold Corp.                       2% e              2.8         $0.49       $0.32      ($0.89)   $0.63        $0.75       $0.65     3%            2%         (5%)     4%           4%           4%
NEM Newmont Mining                          13% e              2.3          $1.77      $2.65       $2.27    $3.60        $5.74       $3.21     4%            6%          5%      8%          12%           7%
  Coal                                                                                                                                         7%            8%         11%      6%          11%          14%
ANR     Alpha Natural Res.                   6% e              2.8         $3.44       $4.35      $4.60     $2.86       $4.17        $5.12     8%           11%         11%      7%          10%          12%
ACI     Arch Coal                           45% e              1.7         $2.45       $2.83      $2.59     $1.77       $2.59        $3.16    12%           13%         12%      8%          12%          15%
CLD     Cloud Peak                          45% e              2.0          $0.92      ($0.21)    $0.72     $1.69        $1.75        NA       6%           (1%)         5%     12%          12%           NA
CNX     Consol Energy                       26% e              4.4          $3.11      $3.82       NA       $0.52       $3.26        $6.29     7%            8%          NA      1%           7%          14%
PCX     Patriot                             11% e              1.2         ($0.17)      $0.57     $2.23     $0.08        $1.91       $3.63    (1%)           4%         15%      1%          13%          24%
BTU     Peabody                             33% e               2.9         $3.57      $4.78       NA       $2.10       $2.96        $2.09     9%           11%          NA      5%           7%           5%
WLT Walter Industries                       26% e              12.0         $5.33      $7.55       NA       $6.54       $10.23       $9.00     8%           11%          NA     10%          15%          13%
  Steel & Ferrous                                                                                                                             (2%)           8%         14%      5%          11%          18%
AKS     AK Steel                             14%               2.7          $0.63      $4.06      $4.25     $0.40        $2.75       $3.72     3%           20%         21%      2%          13%          18%
CLF     Cliffs Natural Resources             1% e              2.4         $2.77       $4.86       NA       $3.68        $5.34        NA       7%           12%          NA      9%          13%           NA
CMC Commercial Metals                       35% e              1.1         ($1.24)    ($1.03)     $1.97     $0.12        $1.43        NA      (9%)          (7%)        14%      1%          10%           NA
NUE     Nucor                                10%               2.7          $1.06      $3.56      $4.73     $2.84        $3.14        NA       3%            9%         12%      7%           8%           NA
SCHN Schnitzer Steel                          7%               2.1         ($6.40)     $0.31      $4.11     $0.38        $3.46        NA     (15%)           1%         10%      1%           8%           NA
STLD Steel Dynamics                         50% e              5.0        $1.26 e     $1.32 e      NA       $1.93        $2.39        NA       8%            9%          NA     13%          16%           NA
X       US Steel                            30% e               2.3        ($3.90)     $5.56      $6.66      NA           NA          NA      (9%)          12%         15%      NA           NA           NA

Source: FactSet, Morgan Stanley Research




                                                                                                                                                                                                                  8
                                                                                                                                   MORGAN                      STANLEY                  RESEARCH

                                                                                                                                   February 8, 2010
                                                                                                                                   Metals & Mining Call




Exhibit 16
Commodity Price and Inventory Charts
                       Aluminum Exchange Inventories      Aluminum       Copper Exchange Inventories      Copper     Nickel LME Inventories     Nickel   Zinc LME Inventories      Zinc      CAPP Prompt       CAPP 1 Yr Fwd            PRB Coal             Nat Gas         Chinese Coke        Gold      Moly      Platinum
  Last 18 Months                 272.8%                    (31.7%)                 290.2%                 (20.7%)            270.7%             (0.8%)         202.0%             14.1%        (57.2%)            (38.5%)                (49.5%)             (37.1%)            #DIV/0!         21.2%    (55.0%)      (7.6%)
  Last 12 Months                  63.3%                     40.8%                  35.7%                   88.0%             98.2%              49.5%           44.2%             70.6%        (14.6%)              1.1%                 (20.2%)              20.0%             (5.7%)          17.7%     65.4%       53.4%
  Last 6 Months                   4.0%                      (2.6%)                  89.2%                   3.4%             57.4%             (13.6%)          15.2%              5.8%         11.2%               9.6%                  15.1%               47.3%             (2.9%)          10.7%    (12.6%)      17.2%
  Last 3 Months                   2.7%                       3.3%                   36.8%                  (4.4%)            27.9%              (2.6%)          17.3%             (8.6%)         7.3%              10.4%                  24.8%               20.0%              13.8%          (2.6%)    37.2%       10.5%

 $1.50                   Aluminum LME Spot ($/lb)                           6,000,000           Aluminum Exchange Inventories (MT)                       $160              Central App Prompt NYMEX Coal Spot ($/ton)                       $1,300                                Gold ($/oz)
                                                                                                  from bottom, LME, Comex, SME)                                                                                                                                                                                    $1,066
 $1.30                                                                      5,000,000                                                                    $140                                                                               $1,200

                                                                 $0.88                                                                                   $120                                                                               $1,100
 $1.10                                                                      4,000,000
                                                                                                                                                         $100                                                                               $1,000
 $0.90                                                                      3,000,000
                                                                                                                                                          $80                                                                                 $900
 $0.70                                                                      2,000,000                                                                                                                                          $50.88
                                                                                                                                                          $60                                                                                 $800

 $0.50                                                                      1,000,000                                                                     $40                                                                                 $700
    Aug-08    Nov-08     Feb-09    May-09    Aug-09     Nov-09                     Aug-08    Nov-08     Feb-09   May-09   Aug-09      Nov-09               Aug-08       Nov-08     Feb-09     May-09     Aug-09      Nov-09                        Aug-08     Nov-08      Feb-09      May-09    Aug-09   Nov-09

                          Copper LME Spot ($/lb)                            1,000,000           Copper Exchange Inventories (MT)                         $160                                                                               $40                               Molybdenum ($/lb)
                                                                                                                                                                        Central App 1 Year Future NYMEX Coal Spot ($/ton)
                                                                                                 from bottom, LME, Comex, SME)
 $4.00                                                                                                                                                   $140
                                                                 $2.83        750,000                                                                                                                                                       $32
                                                                                                                                                         $120
 $3.00                                                                                                                                                                                                                                      $24
                                                                              500,000                                                                    $100                                                                                                                                                      $15.30
                                                                                                                                                                                                                                            $16
 $2.00                                                                                                                                                    $80                                                                  $62.73
                                                                              250,000
                                                                                                                                                          $60                                                                                $8

 $1.00                                                                                0                                                                   $40                                                                                $0
    Aug-08    Nov-08     Feb-09    May-09    Aug-09     Nov-09                     Aug-08    Nov-08     Feb-09   May-09   Aug-09      Nov-09               Aug-08       Nov-08     Feb-09     May-09     Aug-09      Nov-09                   Aug-08        Nov-08       Feb-09     May-09      Aug-09   Nov-09

 $15.00                        Nickel LME Spot ($/lb)                       200,000                     Nickel LME Inventories (MT)                      $25                      Powder River Basin Coal Spot ($/ton)                      $900            Chinese 2nd Grade Coke for Export FOB ($/tonne)
                                                                                                                                                                                                                                            $800
                                                                            150,000                                                                      $20                                                                                $700
 $10.00                                                          $7.87
                                                                                                                                                                                                                                            $600
                                                                            100,000                                                                      $15                                                                                $500
  $5.00                                                                                                                                                                                                                        $10.42       $400                                                                    $330
                                                                             50,000                                                                      $10                                                                                $300
                                                                                                                                                                                                                                            $200
  $0.00                                                                           0                                                                       $5                                                                                $100
     Aug-08   Nov-08      Feb-09   May-09    Aug-09     Nov-09                   Aug-08     Nov-08     Feb-09    May-09   Aug-09      Nov-09              Aug-08        Nov-08    Feb-09     May-09      Aug-09      Nov-09                    Aug-08       Nov-08       Feb-09      May-09     Aug-09   Nov-09

 $2.00                         Zinc LME Spot ($/lb)                         600,000                      Zinc LME Inventories (MT)                       $15.00                                                                                                                    Platinum ($/oz)
                                                                                                                                                                                   Nat Gas (NYMEX, $/mmBtu)                                 $2,300
                                                                            500,000                                                                      $12.50
 $1.50                                                                                                                                                                                                                                      $2,000
                                                                 $0.90                                                                                   $10.00                                                                             $1,700                                                                 $1,483
                                                                            400,000
 $1.00                                                                                                                                                    $7.50                                                                $5.52        $1,400
                                                                            300,000
                                                                                                                                                          $5.00                                                                             $1,100
 $0.50
                                                                            200,000
                                                                                                                                                          $2.50                                                                               $800

 $0.00                                                                      100,000                                                                       $0.00                                                                               $500
    Aug-08    Nov-08     Feb-09    May-09    Aug-09     Nov-09                   Aug-08     Nov-08     Feb-09    May-09   Aug-09      Nov-09                   Aug-08    Nov-08     Feb-09     May-09     Aug-09     Nov-09                        Aug-08     Nov-08      Feb-09      May-09    Aug-09   Nov-09


Source: Bloomberg, Morgan Stanley Research




                                                                                                                                                                                                                                                                     9
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                                                                               Metals & Mining Call




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                                                                                                                                                   10
                                                                                              MORGAN            STANLEY           RESEARCH

                                                                                              February 8, 2010
                                                                                              Metals & Mining Call




                              Coverage Universe    Investment Banking Clients (IBC)
                                             % of                   % of % of Rating
Stock Rating Category            Count       Total     Count Total IBC Category
Overweight/Buy                     999          40%            296         41%           30%
Equal-weight/Hold                1088           43%            333         46%           31%
Not-Rated/Hold                       21           1%              4          1%          19%
Underweight/Sell                   396          16%             90         12%           23%
Total                            2,504                         723

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                                                                                                                                                                              11
                                                                                             MORGAN           STANLEY            RESEARCH

                                                                                             February 8, 2010
                                                                                             Metals & Mining Call




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                                                                                                                                                                            12
                                                                                       MORGAN    STANLEY            RESEARCH




The Americas                                   Europe                                    Japan                           Asia/Pacific
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Industry Coverage:Nonferrous Metals & Mining

Company (Ticker)                              Rating (as of) Price* (02/05/2010)


Mark Liinamaa
Alcoa Inc. (AA.N)                            O (12/21/2009)                   $13.18
Century Aluminum (CENX.O)                    E (01/21/2009)                   $11.12
Cliffs Natural Resources (CLF.N)             E (07/12/2007)                   $41.69
Freeport-McMoRan (FCX.N)                     E (01/21/2009)                   $70.23

Stock Ratings are subject to change. Please see latest research for each company.
* Historical prices are not split adjusted.




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