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									                                                                                  MORGAN                                                    STANLEY                                                    RESEARCH
                                                                                  NORTH                                            AMERICA

                               The Institutional Investor 2011 All-America
                                                                                  Morgan Stanley & Co. Incorporated                                                                           Evan L Kurtz, CFA
                               Research Team Survey is now open for voting.
                                                                                                                                                                                              Evan.Kurtz@morganstanley.com
                               We would appreciate your vote as part of the
                                                                                                                                                                                              +1 212 761 7583
                               feedback that helps us understand who you value
                               and align our research offering with your needs.                                                                                                               Paretosh Misra, Ph.D
                                                                                                                                                                                              Paretosh.Misra@morganstanley.com
                               Request your ballot.                                                                                                                                           +1 212 761 3590

                                                                                                                                                                                              Wes Sconce
                June 9, 2011                                                                                                                                                                  Wes.Sconce@morganstanley.com
                                                                                                                                                                                              +1 212 761 6004


Industry View   Steel
In-Line
                Quick Comment: Are Steel
                                                                                  Pricing: The Second Derivative Has Gone Positive
                Prices Bottoming?                                                                                                                                                         HRC ($/ton)                                                                                                   $900
                                                                                                                                                                                                                                                                                                        $880
                                                                                                                                                                                                                                                                                                        $860

                Steel prices appear to be leveling off, which is                                                                                                                                                                                                                                        $840
                                                                                                                                                                                                                                                                                                        $820
                usually a good entry point for steel stocks.                                                                                                                                                                                                                                            $800
                                                                                                                                                                                                                                                                                                        $780
                Producers’ recent attempts to stem price declines                                                                                                                    Prices appear to be flattening out                                                                                 $760

                appear to be working, and we are hearing reports that                                                                                                                                                                                                                                   $740
                                                                                                                                                                                                                                                                                                        $720
                prices have stabilized between $760/t and $800/t for                                                                                                                                                                                                                                    $700




                                                                                                                                                                                                                                                    3-May
                                                                                                                                                                                                                                                            10-May
                                                                                                                                                                                                                                                                     17-May
                                                                                                                                                                                                                                                                              24-May
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                                                                                     4-Jan
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                                                                                                                                                                                                                                                                                                7-Jun
                hot-rolled coil. We attribute the mills’ success to falling
                imports (finished steel licenses were down 15% in May),           Source: Steel Market Update, Morgan Stanley Research
                low inventory levels and a rise in scrap prices (up $20/t
                in June). While the jury is still out on whether this is the
                true bottom, we think market fundamentals will begin to           Lead Times Have Moved Out a Bit for Higher Value
                turn up by the end of the summer so any further                   Products
                weakness would be short-lived. Our top picks for                                                                                                    Lead Times                                                                           Pricing
                                                                                                                                                                Current     Prior                                                                   Current     Prior
                playing recovering US fundamentals are AKS and X.                 (Data from 5/25)                                                               Week       Week                                                                     Week       Week
                                                                                  Hot-rolled Coil                                                               2-5 wks. 2-5 wks.                                                                    $760/t    $760/t
                Reasons to be bullish ahead of 2H11. MS US                        Cold Rolled Coil                                                              4-7 wks. 5-7 wks.                                                                    $850/t    $860/t
                economist, David Greenlaw, believes the recent                    Galvanized Coil                                                               5-8 wks. 4-7 wks.                                                                    $923/t    $918/t
                weakness in US economic data was a result of transient            Galvalume Coil                                                                4-8 wks. 3-7 wks.                                                                   $1166/t    $1171/t
                                                                                  Source: Steel Market Update, Morgan Stanley Research
                factors, such as Japanese quake knock on effects, and
                weather issues. David is forecasting near 4% growth in
                2H11 as a result of higher auto production, lower gas
                                                                                  We Believe Steel Stocks Are Pricing In More Bad
                prices, tax benefit induced spending and higher net
                                                                                  News than Other Materials and Industrials Names
                exports. In recent conversations with steel producers,
                we were told that auto production could be very strong in                                        5%                                                                                                                                                                     2.7%
                4Q and push US auto steel capacity to the limit.                                                 0%
                                                                                      YTD Performance




                                                                                                             -5%                                                                                                                                    -1.5%
                                                                                                                                                                                                                -3.0%
                China growth fears running high. While China growth
                                                                                                         -10%                         -8.0%
                fears remain an overhang, US steel stocks (X in
                                                                                                         -15%
                particular) have underperformed the other materials and
                                                                                                         -20%
                industrials verticals and we believe they are already                                    -25%
                pricing in significant slowing in China. Chinese steel                                   -30%                                                           -26.7%
                production has been falling, and combined with a                                                                      Steel                          US Steel                                   Metals                         Materials                          Industrials
                                                                                                                                      (SLX)                            (X)                                      (XME)                           (XLB)                                (XLI)
                government inclination to restrict exports, we believe the
                impact to US fundamentals will be limited.                        Source: Steel Market Update, Morgan Stanley Research


                Upcoming catalyst: NUE/STLD 2Q guidance due out
                by the end of next week. While metal margins may be               Morgan Stanley does and seeks to do business with
                slightly more compressed than what was expected when              companies covered in Morgan Stanley Research. As
                                                                                  a result, investors should be aware that the firm may
                most consensus numbers were issued in late April, the             have a conflict of interest that could affect the
                delta is well within the margin of error in our models and        objectivity of Morgan Stanley Research. Investors
                we are leaving our estimates unchanged (NUE at $0.90              should consider Morgan Stanley Research as only a
                and STLD at $0.60). Commentary provided on                        single factor in making their investment decision.
                improving current market conditions may drive the                 For analyst certification and other important
                stocks more than the guidance itself.                             disclosures, refer to the Disclosure Section,
                                                                                  located at the end of this report.
                                                                                                      MORGAN                STANLEY   RESEARCH

                                                                                                      June 9, 2011
                                                                                                      Steel




Risk-Reward Snapshot: AK Steel (AKS, $14, Overweight, PT $24)
Risk-Reward is Sharply Skewed to the Upside                                                                                      Investment Case
      $50                                                                                                                        • We believe temporary 2010 cost
       45
                                                                                                             $46 (+218%)           issues have caused investors to
                                                                                                                                   overlook the true earnings power of
       40
                                                                                                                                   the company.
       35
                                                                                                                                 • Quarterly iron ore pricing and iron ore
       30                                                                                                                          pass-through clauses should
       25
                                                                                                                                   eliminate some of the risk of
                                                                                                           $24.00 (+66%)
                                                                                                                                   prolonged cost-related margin
       20
                                                                              $ 14.45
                                                                                                                                   squeezes.
       15                                                                                                                        • Electrical steel demand appears to
       10
                                                                                                               $11 (-24%)          be recovering, which could provide
                                                                                                                                   an earnings tailwind if volumes rise
        5
                                                                                                                                   and annual contract pricing resets
       0
                                                                                                                                   higher going into 2012.
       Jun-09             Dec-09           Jun-10           Dec-10            Jun-11                Dec-11             Jun-12
            Price Target (Jun-12)              Historical Stock Performance                    Current Stock Price               • We believe the market is overly
Source: FactSet, Morgan Stanley Research                                                                                           concerned about a collapse in
 Price Target: $24                   Our $24 price target is based on 10x our 2012e EPS of $2.40 and                               carbon steel fundamentals. We think
                                     4.4x 2012e EBITDA, which is modestly below the long run average                               low inventories and a reversal in
                                     forward P/E of 11.3x and EV/EBTIDA of 4.7x.                                                   import growth will prevent pricing
 Bull                10.0x 2012      Strong improvement in 2012 demand: The hot-rolled coil price                                  from falling to levels seen last year.
 Case                EPS             per ton averages $825 in 2012. AK steel ships 6.2mn tons.
 $46                 of $4.60        Electrical steel prices climb 10% and volumes increase 20%. US
                                                                                                                                 Key Value Drivers
                                     auto production climbs to 14mn vehicles.                                                    • AKS earnings are highly levered to
 Base                10.0x 2012      Steady improvement in 2012 demand: The hot-rolled coil price                                  the auto, appliance, manufactured
 Case                EPS             per ton averages $745 in 2012. AK steel ships 6mn tons. Electrical                            goods and power infrastructure
 $24                 of $2.40        steel prices climb 3% and volumes climb 10%. US auto production                               markets.
                                     climbs to 13.5mn vehicles.                                                                  Potential Catalysts
 Bear                1.5x 2011       Double-dip recession: The hot-rolled coil price per ton falls to
                                                                                                                                 • Rising confidence that US prices
 Case                Book Value      $680 in 2012. While AKS troughed near 1.0x book value in March
                                                                                                                                   have bottomed would improve
 $11                 of $7           2009, we believe improved liquidity will prevent a fall to similar
                                                                                                                                   investor sentiment.
                                     levels in a double-dip.
                                                                                                                                 • We expect above consensus 3Q
Bear to Bull                                                                                                                       guidance, released in late July
 60
                                                                                                                                 • 6/16 is the tentative release data for
 50                                                                                                   5.00                         May service center inventory data.
                                                                         14.00          2.00
 40                                                                                                                  45          Risks
 30             price target: 24
                                    1.00
                                                3.00                                                                             • As a high beta name, the stock is
                         9.00
 20                                                          24                                                                    vulnerable to a broad market sell-off
 10
                                                                                                                                   on macro concerns.
            11                                                                                                                   • New flat-rolled and auto steel
  0
            Bear     HRC falls to Volumes Bear Case         Base      HRC Rises Volumes Bull Case                    Bull          capacity in the US market could limit
            Case       $680        Fall to Electical        Case       to $825   Rise to Electical                   Case          pricing power.
                                   5.8mnt   Steel                                6.2mnt   Steel
                                            Market                                        Market
Source: Morgan Stanley Research




                                                                                                                                                                        2
                                                                                                    MORGAN                STANLEY   RESEARCH

                                                                                                    June 9, 2011
                                                                                                    Steel




Risk-Reward Snapshot: US Steel (X, $42, Overweight, PT $70)
We assign a greater probability to the bull case than the bear case                                                            Investment Case
    $120                                                                                                                       • X is well positioned from a raw
                                                                                                                                 material integration and product
     100                                                                                                   $100 (+138%)          market standpoint.
                                                                                                                               • Shares traded off on oil price
        80                                                                                                                       concerns, while X’s tubular segment
                                                                                                         $70.00 (+66%)           benefits from high global oil prices
        60
                                                                                                                                 and Morgan Stanley economists
                                                                                                                                 believe risks to global growth are
                                                                                $ 42.05
                                                                                                                                 mild.
        40
                                                                                                                               • US Steel fundamentals are in good
                                                                                                             $28 (-33%)
                                                                                                                                 shape; improving 2H11 demand, low
        20
                                                                                                                                 inventories, falling imports and
                                                                                                                                 disciplined production should support
        0
                                                                                                                                 pricing.
        Jun-09              Dec-09           Jun-10            Dec-10           Jun-11            Dec-11             Jun-12
             Price Target (Jun-12)               Historical Stock Performance                Current Stock Price               • After two years of US aggregate
Source: FactSet, Morgan Stanley Research                                                                                         capex below depreciation, we
 Price Target: $70                    Our $70 price target is based on 8.1x our 2012e EPS of $8.60 and                           believe X is well positioned for a US
                                      5.1x 2012e EBITDA, in line with the 10-year average forward P/E                            replacement cycle for autos, heavy
                                      of 9.5x and EV/EBTIDA of 4.9x.                                                             trucks and machinery.
 Bull                8.9x 2011        Strong rebound in real demand in 2011. The hot-rolled coil price                         Key Value Drivers
 Case                EPS              per ton averages to $840 in 2011. Operating rates average 83%.
                                                                                                                               • High fixed costs make US Steel’s
 $100                of $11.30        Iron ore price bounces to recent high, pushing steel price higher.
                                                                                                                                 earnings highly leveraged to the steel
 Base                12.5x 2011       Real US demand gradually climbs, China production recovers                                 price, every $10/t move in HRC tends
 Case                EPS              in 2011. The hot-rolled coil price per ton averages $765 in 2011.                          to move shares by $1.30.
 $70                 of $5.60         Industry operating rates average 75%. Chinese steel production
                                      climbs 7% in 2011, causing global cost-push price hikes.
                                                                                                                               Potential Catalysts
 Bear                1.5x 2009        Double-dip recession: The hot-rolled coil price per ton falls to                         • Rising confidence that US prices
 Case                Tang. BV         $650 in 2011. While X troughed at 1.0x tangible book value in                              have bottomed would improve
 $28                 of $19           March 2009, we believe improved liquidity will prevent a fall to                           investor sentiment.
                                      similar levels in a double-dip.
                                                                                                                               • A rebound in US economic data.
Bear to Bull                                                                                                                   • Evidence that China will successfully
 120                                                                                                                             manage a soft landing.
                                                                                                    11.00
 100                                                                                      9.00                                 • 6/16 is the tentative release data for
                                                                            10.00                                  100           May service center inventory data.
  80             price target: 70                15.00

  60                                 12.00
                                                                70                                                             Risks
                          15.00
  40                                                                                                                           • As a high beta name, the stock is
                                                                                                                                 vulnerable to a broad market sell-off
  20          28                                                                                                                 on macro concerns.
    0
                                                                                                                               • Overcapacity in the US market could
             Bear      2011 HRC 2011 Op. High Oil              Base      2011 HRC 2011 Op. EM and DM               Bull
             Case        $650/t Rates of  Prices               Case       of $840 Rates of Demand                  Case          limit pricing..
                                  65%    Trigger a                                  83%     Rebound
                                         Recession                                          Sharply
Source: Morgan Stanley Research




                                                                                                                                                                      3
                                                                                                                                  MORGAN                  STANLEY                   RESEARCH

                                                                                                                                  June 9, 2011
                                                                                                                                  Steel




Exhibit 1
North American Company Comparables
                                                         Price                             MS EPS                                     Cons EPS                                      MS PE                                    Consensus PE
North America Metals & Mining         Stock Rating
                                                       6/7/2011           2011              2012                2013           2011     2012      2013            2011               2012                 2013          2011     2012    2013
  Non-ferrous                                                                                                                                                     15.0                9.4                  7.0          15.1      9.3      7.9
AA      Alcoa                          Overweight       $15.69            $1.42               $1.85               $2.34           $1.37    $1.64    $1.75         11.1                8.5                  6.7          11.5      9.6      8.9
CENX Century Aluminum                 Equal-Weight      $14.70            $1.65               $2.10               $2.75           $1.62    $1.95    $2.14          8.9                7.0                  5.3           9.1      7.6      6.9
NOR Noranda Aluminum                   Overweight       $14.00            $1.46               $1.70               $2.05           $1.62    $1.74   $1.73           9.6                8.2                  6.8           8.6      8.1      8.1
FCX     Freeport-McMoran               Overweight       $49.76            $6.54               $7.38               $6.54           $6.18    $6.33    $5.66          7.6                6.7                  7.6           8.0      7.9      8.8
MCP Molycorp                           Overweight       $58.70            $1.55               $3.56               $7.00           $1.53    $4.43    $8.68         37.8               16.5                  8.4          38.3     13.2      6.8
  Gold                                                                                                                                                            18.3               16.6                 18.0          16.5     14.0     14.1
ABX     Barrick Gold                       ++           $45.33            $4.22                $4.00              $3.74           $4.35    $4.56    $4.49         10.7               11.3                 12.1          10.4      9.9     10.1
GG      Goldcorp Inc.                 Equal-Weight      $47.99            $1.95                $2.17              $1.91           $2.30    $2.69    $2.88         24.6               22.1                 25.2          20.9     17.9     16.7
KGC Kinross Gold Corp.                Equal-Weight      $15.44            $0.63                $0.79              $0.75           $0.69    $0.94    $0.94         24.6               19.5                 20.5          22.2     16.4     16.5
NEM Newmont Mining                    Equal-Weight      $52.94            $4.04                $3.91              $3.76           $4.22    $4.40    $4.08         13.1               13.5                 14.1          12.6     12.0     13.0
  Coal                                                                                                                                                            11.4                8.4                  7.6          13.4      8.2      8.0
ANR     Alpha Natural Res.                 ++           $48.23              ++                   ++                 ++            $4.61    $6.26    $5.93          NA                 NA                   NA           10.5      7.7      8.1
ACI     Arch Coal                          ++           $26.73            $2.50               $4.43               $5.09           $2.52    $3.92    $4.39         10.7                6.0                  5.2          10.6      6.8      6.1
CLF     Cliffs Natural Res.           Equal-Weight      $85.63           $12.74              $12.60              $12.25          $14.42 $14.51 $12.25              6.7                6.8                  7.0           5.9      5.9      7.0
CLD     Cloud Peak                    Equal-Weight      $19.23            $1.69               $2.06               $3.08           $1.77    $2.08    $2.85         11.4                9.3                  6.2          10.8      9.3      6.7
CNX     Consol Energy                 Equal-Weight      $49.23            $2.95               $4.65               $5.28           $2.94    $4.48    $4.95         16.7               10.6                  9.3          16.7     11.0      9.9
PCX     Patriot                       Underweight       $21.35            $0.40               $2.50               $2.61           $0.66    $2.72    $2.56          NM                 8.6                  8.2          32.3      7.9      8.3
BTU     Peabody                        Overweight       $56.86            $5.00               $6.12               $6.10           $4.53    $5.99    $5.95         11.4                9.3                  9.3          12.6      9.5      9.6
  Steel & Ferrous                                                                                                                                                 10.9                7.6                  6.4          12.0      8.6      7.9
AKS     AK Steel                       Overweight       $14.53          $1.50 e              $2.40 e             $3.00 e          $1.30    $1.83    $1.95          9.7                6.0                  4.8          11.2      7.9      7.5
CMC Commercial Metals                 Equal-Weight      $14.11            $0.25               $1.65               $2.60           $0.20    $1.71    $2.11          NM                 8.5                  5.4           NM       8.2      6.7
MUSA Metals USA                        Overweight       $15.00            $1.50               $1.95               $2.40           $1.57    $1.94    $2.00         10.0                7.7                  6.2           9.6      7.7      7.5
NUE     Nucor                         Equal-Weight      $40.04            $3.30               $4.75               $5.25           $2.89    $3.90   $4.17          12.1                8.4                  7.6          13.9     10.3      9.6
SCHN Schnitzer Steel                  Underweight       $56.14            $3.80               $4.60               $5.30           $4.20    $5.02    $5.70         14.8               12.2                 10.6          13.4     11.2      9.8
STLD Steel Dynamics                    Overweight       $16.23            $1.90               $2.90               $3.05           $1.83    $2.26    $2.35          8.6                5.6                  5.3           8.8      7.2      6.9
X       US Steel                       Overweight       $42.85            $4.25               $8.60               $9.60           $2.79    $5.63    $6.05         10.1                5.0                  4.5          15.4      7.6      7.1
"Pens-Adj" = Enterprise Value and MS EBITDA adjusted for Pension and OPEB            "ASIF" = As-Stated-in-Financials, excluding Pension and OPEB          ASIF presented because we believe it is most comparable to consensus
                                      Current EV,   Current EV,       MS EBITDA, Pens-Adj               MS EBITDA, ASIF              Cons EBITDA, ASIF      MS EV/EBITDA, Pens-Adj         MS EV/EBITDA (ASIF)          Cons EV/EBITDA (ASIF)
North America Metals & Mining
                                      Pension-Adj        ASIF        2011       2012     2013        2011     2012      2013       2011     2012     2013    2011      2012     2013      2011       2012      2013     2011     2012    2013
  Non-ferrous                                                                                                                                                 9.0       5.7      4.4       8.7        5.4       4.2      9.5      5.8      4.6
AA      Alcoa                            34,466         31,213       4744       5647     6994        4658    5623       7038      4403     4774     5557      7.3       6.1      4.9       6.7        5.6       4.4      7.1      6.5      5.6
CENX Century Aluminum                     1,733          1,621      257 e      296 e    393 e       283 e    326 e     422 e       269      318      364      6.7       5.8      4.4       5.7        5.0       3.8      6.0      5.1      4.5
NOR Noranda Aluminum                      1,332          1,332       304        323       367        304      323       367        295      310      319      4.4       4.1      3.6       4.4        4.1       3.6      4.5      4.3      4.2
FCX     Freeport-McMoran                 52,354         52,354      12950      14498    12759       12950   14498      12759     12665     13029   11725      4.0       3.6      4.1       4.0        3.6       4.1      4.1      4.0      4.5
MCP Molycorp                              4,725          4,725       210        529       963        210      529       963        183      524     1115     22.5       8.9      4.9      22.5        8.9       4.9     25.8      9.0      4.2
  Gold                                                                                                                                                        8.9       8.1      8.5       8.9        8.1       8.5      8.2      7.4      7.3
ABX     Barrick Gold                     51,573         51,573      7666        7529     7246        7666    7529       7246      8001      8535    8605      6.7       6.8      7.1       6.7        6.8       7.1      6.4      6.0      6.0
GG      Goldcorp Inc.                    39,707         39,707     2,875 e 3,352 e 3,114 e 2,875 e 3,352 e 3,114 e 3365                     3952    4042     13.8      11.8     12.8      13.8       11.8      12.8     11.8     10.0      9.8
KGC Kinross Gold Corp.                   17,456         17,456     1,898 e 2,100 e 2,040 e 1,868 e 2,100 e 2,040 e 1950                     2159    2237      9.2       8.3      8.6       9.3        8.3       8.6      9.0      8.1      7.8
NEM Newmont Mining                       28,769         28,769      4900        5283     5068       4900     5283       5068      4983     5375     5339      5.9       5.4      5.7       5.9        5.4       5.7      5.8      5.4      5.4
  Coal                                                                                                                                                        6.2       4.9      4.5       6.2        4.7       4.3      4.6      3.5      3.3
ANR     Alpha Natural Res.                                            ++         ++        ++         ++       ++        ++       1241      2856    2126      NA        NA       NA        NA         NA        NA       0.0      0.0      0.0
ACI     Arch Coal                         6,448          6,398       1025       1477     1673        1022    1476       1673      1051     1428     1547      6.3       4.4      3.9       6.3        4.3       3.8      6.1      4.5      4.1
CLF     Cliffs Natural Res.              12,333         12,097      2946        2921     2847        2934    2911       2839      3228     3663     3343      4.2       4.2      4.3       4.1        4.2       4.3      3.7      3.3      3.6
CLD     Cloud Peak                        1,468          1,468      333 e      379 e    482 e       333 e    379 e     482 e       341      372      439      4.4       3.9      3.0       4.4        3.9       3.0      4.3      3.9      3.3
CNX     Consol Energy                    17,437         15,110      2058        2690     2938       1788     2414       2654      1804     2346     2581      8.5       6.5      5.9       8.4        6.3       5.7      8.4      6.4      5.9
PCX     Patriot                           3,192          2,313       450        722       738        337      608       623        344       584     626      7.1       4.4      4.3       6.9        3.8       3.7      6.7      4.0      3.7
BTU     Peabody                          18,877         18,208       2748       3213     3462        2656    3125       3375      2485     3059     3117      6.9       5.9      5.5       6.9        5.8       5.4      7.3      6.0      5.8
  Steel & Ferrous                                                                                                                                             6.7       5.0      4.7       6.3        4.7       4.4      6.6      5.0      4.7
AKS     AK Steel                          3,390          2,361      592 e      745 e    830 e       554 e    724 e     830 e       460      577      620      5.7       4.5      4.1       4.3        3.3       2.8      5.1      4.1      3.8
CMC Commercial Metals                     2,642          2,642       315        561      736         315      561       736        296      555      628      8.4       4.7      3.6       8.4        4.7       3.6      8.9      4.8      4.2
MUSA Metals USA                           1,048          1,048       144        169       196        143      169       196        156       182     186      7.3       6.2      5.3       7.3        6.2       5.3      6.7      5.8      5.6
NUE     Nucor                            15,518         15,518      2426        3090     3296       2426     3090       3296      2217     2789     2977      6.4       5.0      4.7       6.4        5.0       4.7      7.0      5.6      5.2
SCHN Schnitzer Steel                      1,739          1,739       238        280       232        238      280       232        249      292      303      7.3       6.2      7.5       7.3        6.2       7.5      7.0      5.9      5.7
STLD Steel Dynamics                       6,274          6,274      1068        1454     1465        1068    1454       1465      1051     1248     1290      5.9       4.3      4.3       5.9        4.3       4.3      6.0      5.0      4.9
X       US Steel                         12,118          9,204       2118       3098     3309        2067    2988       3226      1710      2339    2523      5.7       3.9      3.7       4.5        3.1       2.9      5.4      3.9      3.6
"Pens-Adj" = Enterprise Value and MS EBITDA adjusted for Pension and OPEB            "ASIF" = As-Stated-in-Financials, excluding Pension and OPEB          ASIF presented because we believe it is most comparable to consensus
                                       Net Debt to     P/Tang.                             MS FCF/Shr                                   Cons FCF/Shr                            MS FCF Yield                             Consensus FCF Yield
North America Metals & Mining
                                      Cap, 2010YE Bk, 2010YE               2011                 2012               2013            2011     2012     2013         2011               2012                 2013          2011     2012    2013
  Non-ferrous                                                                                                                                                      4%                10%                  14%            8%      11%      15%
AA      Alcoa                             32%             1.9            ($0.17)              $1.73               $2.23           $1.41    $1.11    $1.68         (1%)               11%                  14%            9%       7%      11%
CENX Century Aluminum                      1%             1.3           $1.21 e              $2.47 e             $2.94 e          $1.91    $2.88    $2.85          8%                17%                  20%           13%      20%      19%
NOR Noranda Aluminum                      54%             8.7             $0.72               $1.16               $2.12             NA        NA      NA           5%                 8%                  15%            NA       NA       NA
FCX     Freeport-McMoran                   4%             3.5             $5.12               $6.08               $5.59           $6.52    $7.83    $8.42         10%                12%                  11%           13%      16%      17%
MCP Molycorp                            182% e            7.9            ($2.60)              $0.80               $6.39          ($0.71)   $0.74    $6.81         (4%)                1%                  11%           (1%)      1%      12%
  Gold                                                                                                                                                             1%                 2%                   2%            3%       4%       5%
ABX     Barrick Gold                      10%             3.3             $1.14               $1.20               $2.48           $3.10    $3.21    $3.49          3%                 3%                   5%            7%       7%       8%
GG      Goldcorp Inc.                      3%             2.0           ($0.06) e            $0.79 e             $0.64 e          $1.00    $2.25    $3.59         (0%)                2%                   1%            2%       5%       7%
KGC Kinross Gold Corp.                     8%             2.0           ($0.19) e           ($0.21) e           ($0.33) e         $0.02    $0.02   ($0.14)        (1%)               (1%)                 (2%)           0%       0%     (1%)
NEM Newmont Mining                         1%             1.9             $0.99               $2.15               $2.18             NA        NA      NA           2%                 4%                   4%            NA       NA       NA
  Coal                                                                                                                                                             7%                11%                  13%            7%      10%      11%
ANR     Alpha Natural Res.                 ++             NA                ++                   ++                 ++            $4.10    $5.81    $6.11          NA                 NA                   NA            9%      12%      13%
ACI     Arch Coal                        40% e            2.0             $2.66               $4.18               $4.93           $2.28    $3.78    $4.14         10%                16%                  18%            9%      14%      15%
CLF     Cliffs Natural Res.               1% e            3.2            $11.02              $10.77              $12.27          $10.89 $11.90 $10.06             13%                13%                  14%           13%      14%      12%
CLD     Cloud Peak                        26%             2.2           $0.11 e              $0.67 e             $1.62 e          $1.44    $1.06    $0.65          1%                 4%                   8%            7%       6%      3%
CNX     Consol Energy                     53%             3.6             $4.25               $5.54               $6.01           $0.45    $1.00    $2.05          9%                11%                  12%            1%       2%      4%
PCX     Patriot                           20%             2.3            ($0.15)              $1.89               $2.48           $0.67    $2.35    $3.38         (1%)                9%                  12%            3%      11%      16%
BTU     Peabody                           22%             3.2             $5.44               $6.49               $6.95           $3.45    $4.68    $5.55         10%                11%                  12%            6%       8%      10%
  Steel & Ferrous                                                                                                                                                  4%                 9%                  13%            1%      11%      14%
AKS     AK Steel                          52%             2.7           $0.43 e              $2.97 e             $3.07 e            NA        NA      NA           3%                20%                  21%            NA       NA       NA
CMC Commercial Metals                     42%             1.4            ($0.27)              $0.71               $1.90          ($0.17)   $1.82    $2.21         (2%)                5%                  13%           (1%)     13%      16%
MUSA Metals USA                           70%             4.6             $0.54               ($0.10)             $0.20          ($0.87)   $2.26    $2.54          4%                (1%)                  1%           (6%)     15%      17%
NUE     Nucor                             21%             NA              $3.02               $3.33               $4.94           $1.76    $2.62      NA           8%                 8%                  12%            4%       7%       NA
SCHN Schnitzer Steel                      11%             2.6             $1.03               $2.19               $2.27          ($1.16)   $4.79    $5.56          2%                 4%                   4%           (2%)      9%      10%
STLD Steel Dynamics                       50%             4.0             $1.56               $1.60               $2.71           $1.57    $1.56      NA          10%                10%                  17%           10%      10%       NA
X       US Steel                          46%             3.3             $0.76               $6.70               $8.32             NA        NA      NA           2%                16%                  19%            NA       NA       NA
"Pens-Adj" = Enterprise Value and MS EBITDA adjusted for Pension and OPEB            "ASIF" = As-Stated-in-Financials, excluding Pension and OPEB          ASIF presented because we believe it is most comparable to consensus
Source: Company data, Morgan Stanley Research. ‡Rating, price target, and in some cases estimates for this company have been removed from consideration in this report because, under applicable
law and/or Morgan Stanley policy, Morgan Stanley may be precluded from issuing such information with respect to this company at this time.




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                                                       Disclosure Section
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Morgan Stanley Research: AK Steel Holding Corp., Nucor Corporation, US Steel Corporation.
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                         Coverage Universe    Investment Banking Clients (IBC)
                                        % of                   % of % of Rating
Stock Rating Category       Count       Total     Count Total IBC Category
Overweight/Buy               1153        41%         464        48%         40%
Equal-weight/Hold            1140        41%         365        38%         32%
Not-Rated/Hold                108         4%          20         2%         19%
Underweight/Sell              390        14%         108        11%         28%
Total                       2,791                    957
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Overweight (O). The stock's total return is expected to exceed the average total return of the analyst's industry (or industry team's) coverage universe,
on a risk-adjusted basis, over the next 12-18 months.



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Equal-weight (E). The stock's total return is expected to be in line with the average total return of the analyst's industry (or industry team's) coverage
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Europe - MSCI Europe; Japan - TOPIX; Asia - relevant MSCI country index.
.
Stock Price, Price Target and Rating History (See Rating Definitions)




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Industry Coverage:Steel

Company (Ticker)                              Rating (as of) Price* (06/08/2011)


Evan L Kurtz, CFA
AK Steel Holding Corp. (AKS.N)               O (05/23/2011)                   $14.45
Commercial Metals Company                    E (11/18/2008)                    $13.9
(CMC.N)
Metals USA Holdings Corp.                    O (05/19/2010)                   $14.75
(MUSA.N)
Nucor Corporation (NUE.N)                     E (06/09/2009)                  $39.49
Schnitzer Steel Industries                    U (07/17/2009)                  $54.63
(SCHN.O)
Steel Dynamics (STLD.O)                      O (03/02/2009)                    $16.2
US Steel Corporation (X.N)                   O (06/09/2009)                   $42.05
Wes Sconce
Cliffs Natural Resources (CLF.N)              E (07/12/2007)                  $85.75

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




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