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March 1, 2004

Dear Valued Alro Customer,

The metals industry continues to face rapid changes that place a significant strain on consumers of metals. Prices have continued to increase sharply, with price announcements and lead times out to May for many products. Whether in the form of base prices, or as surcharges, prices continue to increase.

Since my letter of January 12, 2004, many of the fundamental factors cited have remained unchanged. To summarize:

Demand for metals in China continues at a very high level, with China importing more metal now than North America.

Demand for metals in the North American market continues to be very strong.

Scrap prices have moved even higher, which is the most significant cost for the mini-mill steel producers.

Coke costs have continued to increase which is a major material cost to the integrated steel mills such as ISG and US Steel. The key factors include recent fires in a coke mine in the United States as well as China not shipping coke to the North American market.

Natural gas costs continue to stay high, a key cost to both integrated and mini-mill steel producers.

Ocean freight costs and ship availability continues to add significant costs to shipping metals and scrap internationally.

The dollar has continued to stay weak, particularly as compared to the euro. This has reduced the attractiveness of European metals makers shipping to the US market. At the same time, it has helped North American manufacturers become more competitive as compared to European based manufacturers. This is a major factor in strong demand for metals in North America.

To manage in this environment, Alro has been fortunate to have developed strong relationships with metals producers, primarily located in North America. As such, we have been able to maintain our commitment to strong inventories of all products.

We feel we are very well positioned to continue to provide the service and products you have come to expect from Alro. If you need additional information or have questions, please feel free to contact your local Alro sales representative. We appreciate your business and look forward to continuing our relationship for many years to come.

Mark Alyea
President, C.O.O.
Alro Steel Corp.

Click here to view the January 12, 2004 Special Metals Market Conditions Letter

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