The Advantage Newsletter — 12/19/2003

MARKET ANALYSIS UPDATE December 19, 2003

As we near 2004, the overall economy seems to have bottomed out and is beginning to gain consistent steam. As operating rates for chlor-alkali pick up, we will see the potential for chlorine to tighten in early 2004 and caustic therefore to soften. GDP has seen record highs and chlorine operating rates reflect this. Even as the September rate is adjusted to reflect the closing of Formosa’s Baton Rouge facility, we still register strong chlorine growth for this time of year. Most producers seem to be on the same page as they discuss the outlook for chlor-alkali, a strong potential increase for chlorine in the second quarter and caustic to soften throughout the first half of 2004. July seems to be a pivotal point for potential increases in chlorine and caustic soda as the summer heats up and caustic demand catches up to supply. It may be possible to see a repeat of the year 2000, whereas caustic bottomed out in June near a range of $50-$80 per dry short ton, fob the gulf, before recording a strong rebound in the second half which registered increases in excess of $200 per dry short ton. This, of course, could be impacted sooner or later with rationalization if producers merge or a given producer is sold. SCORECARD The below components give K.A. Steel Chemicals a genuine touch and feel barometer to the marketplace in order to track trends and collect viable, genuine data points. In today’s environment, every dollar seems to be under intense scrutiny. K.A. Steel Chemicals questions the need to spend thousands of dollars on subscription fees to chemical wires when this information is available for free from our website as well as your local K.A. Steel Chemical representatives. Some market wires do a wonderful job giving a global view of the marketplace and when netted out, this multi-page report comes down to one page, THE PRICE PAGE. This page in itself has become a data point for the consumers, producers, as well as distribution. This data point is one of hundreds of data points that K.A. Steel collects over the course of the month. These hundreds of data points give K.A. Steel a much clearer view of the trends in the marketplace versus concentrating on any one data point. The following information is an overview of the many variables and differences that K.A. Steel Chemicals takes into consideration and has to offer versus what has become a somewhat vogue pattern for large consumers to adopt for pricing mechanisms through chemical market wires. · K.A. Steel Chemicals has thousands of physical transactions in caustic sales, whereas chemical wires have none. · K.A. Steel Chemicals has over 80,000 dry short tons of storage capability, whereas chemical wires have none. · K.A. Steel Chemicals offers market information, trends, and forecasts for free, whereas most chemical wires charge annual fees as high as $6,000 or $6 per dry ton for a consumer averaging 1,000 dry tons per year. · K.A. Steel Chemicals consumes or sells 300,000 dry short tons of caustic soda, whereas chemical wires sell none. · K.A. Steel Chemicals has the ability to swap or trade caustic for a freight savings to be shared with their customers, whereas chemical wires do not have this ability. · K.A. Steel Chemicals has a total of 22 barge tanks, whereas chemical wires have none. · K.A. Steel Chemicals purchases caustic soda from the number one, three and four caustic producers, whereas chemical wires purchase none. · K.A. Steel Chemicals has the ability to import caustic soda in order to tap into global information and services, whereas chemical wires do not have this ability. · K.A. Steel Chemicals supplies inventory management and logistics to our customers, whereas chemical wires supply none. K.A. Steel Chemicals wants to thank all of our customers for their support and wish them a very prosperous 2004 and most importantly, a safe and happy holiday season.

The K.A. Steel ADVANTAGE offers insight into current trends and essential market analysis allowing you to make insightful, well-timed purchasing decisions. With K. A. Steel, customers have the benefit of knowing what K. A. Steel knows. Our customers receive timely coverage of trends in the industry as quickly as the information emerges.