Commercial Transportation  Building and Construction  Aluminum  and Alumina Industrial Products  and Other  6.4% $1.5 billion 10.6% $2.5 billion 24.7% $5.8 billion 11.9% $2.8 billion A strengthening economy drove ton-mile demand for North America (NA) freight up in 2004.  Truck fleets and owner-operators are facing an even more demand- ing emissions regulations change in January of 2007.  Three elements – aging fleet  (created in part due to delayed buying around by some owners to avoid 2002 engines), improved economy, and awareness of new, even stricter emissions regula- tions – created a near-perfect storm scenario, driving NA truck builds and demand up nearly 50% over 2003. This pattern is expected to continue in 2005  and 2006, with total NA heavy- duty truck builds increasing yet another 15% above 2004 levels in late 2005 and throughout most of 2006. New products and innovations by Alcoa will continue to help fleets save weight and improve overall fuel economy. European truck build rates are expected to increase about 5% in 2005 compared to 2004, which were up about 5% over 2003. Trailer builds in NA and  Europe were up 29% and  5%, respectively.  Alcoa’s revenues in this market are from an array of fabricated aluminum products for commer- cial and residential applications, as well as vinyl extrusions and injection moldings for new homes and remodeling. Due to slow economic recovery, nonresidential construction  in Europe experienced a decline of .8% in 2004. While most countries faced  a slowdown in nonresidential construction in 2004, the U.K., Spain, and Central Eastern Europe posted growth. Nonresidential construction in North America increased by 2.5% in 2004 to approximately $165 billion as the growing economy in the U.S. continues  to fuel a recovery in commercial and industrial construction.  While the U.S. grew by 3%,  the recovery for nonresidential construction in Canada lagged behind, posting a 20% decline.  Alcoa is the world’s largest pro- ducer of alumina, a powdery oxide of aluminum refined from bauxite ore and used to produce aluminum and alumina-based chemicals. Alcoa alumina production in 2004 rose 3.6% to 14.3 million mtpy. In 2004, 51% of Alcoa World Alumina and Chemicals’ refinery production was supplied to  outside customers. Aluminum ingot is an interna- tionally produced, priced,  and traded commodity whose  principal trading market is  the London Metal Exchange,  or LME. Worldwide aluminum capacity was 32.7 million mtpy, 8.5% of which was idle. Alcoa’s worldwide capacity is approximately 4.0 million mtpy of which 16% is idle. With the planned smelter restarts at ABI and Wenatchee, idle aluminum capacity is expected to fall  below 10% in 2005. Alcoa’s revenues from this  market include sales of  aluminum sheet, plate, and extrusions to distributors and sales of products and services  for power generation. After reaching bottom in 2004, the projected heavy-duty gas  turbine build rates are expected to experience an increase of  one-third in 2005. This is being driven primarily by the increased  power demand in the Asian  and Middle Eastern markets. Growth opportunities also  exist for the supply of spare parts over the next few years,  as the installed turbine base from the U.S. boom of 1999- 2001 prepares for the first  round of overhauls. North American Heavy Truck  Production New Nonresidential  Construction Annual  Growth Rates Worldwide Aluminum  Ingot Inventory IGT Engine Build Schedule Aluminum Wheel Penetration  in Heavy-Duty Trucks Latin America  U.S. Repair and Improvement  Expenditures Western World Alumina  Demand thousands millions of metric tons number of turbines billions of dollars millions of metric tons Source: Howmet and OEM Market Analysis, January 2005 Source: LME, IAI Total imports  Source: McGraw-Hill Construction Data, Euroconstruct Source: ACT Research 0 50 150 100 200 250 03 04 00 02 01 percent –5.0 –7.5 –10.0 –2.5 0 2.5 5.0 03 04 00 02 01 U.S. Europe 1,000 500 0 1,500 2,000 2,500 00 02 04 94 98 96 LME Warehouse Producers 0 100 200 300 400 500 02 03 04 05E 99 01 00 Source: Alcoa Source: U.S. Census Source: CRU Alcoa percent 20 10  0 30 40 50 60 03 04 00 02 01 Western Europe Japan North America Source: CRU Alcoa alumina 140 130  120 150 160 170 180 00 02 04 94 98 96 0 10 20 30 40 50 03 04 00 02 01 Latin America  & Mexico Smelter-grade  alumina Total imports  into CIS and  China Alcoa segments that sell products to this market:  Flat-Rolled Products,  Engineered Products, Other Alcoa segments that sell products to this market:  Flat-Rolled Products,  Engineered Products, Other Alcoa segments that sell products to this market:  Primary Metals, Alumina and Chemicals Alcoa segments that sell products to this market:  Flat-Rolled Products,  Engineered Products, Other 23