Note 4 - Inventories

The components of inventories were as follows:



	June 30, 2013			December 31, 2012
Manufacturing supplies	$	56.6		$	64.3
Raw materials	79.4			110.7
Work in process	284.2			278.1
Finished products	423.4			430.4
Subtotal	843.6			883.5
Allowance for obsolete and surplus inventory	(25.0		)	(21.4		)
Total Inventories, net	$	818.6		$	862.1

Inventories are valued at the lower of cost or market, with approximately 55% valued by the last-in, first-out (LIFO) method and the remaining 45% valued by the first-in, first-out (FIFO) method. The majority of the Company's domestic inventories are valued by the LIFO method and all of the Company's international (outside the United States) inventories are valued by the FIFO method.

An actual valuation of the inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations must be based on management’s estimates of expected year-end inventory levels and costs. Because these calculations are subject to many factors beyond management’s control, annual results may differ from interim results as they are subject to the final year-end LIFO inventory valuation.

The LIFO reserve at June 30, 2013 and December 31, 2012 was $281.2 million and $280.6 million, respectively. The Company recognized an increase in its LIFO reserve of $4.5 million and $0.6 million during the second quarter and first six months of 2013, respectively, compared to an increase in its LIFO reserve of $0.1 million and $9.2 million during the second quarter and first six months of 2012, respectively.

Based on current expectations of inventory levels and costs, the Company expects to recognize a decrease of approximately $0.7 million in its LIFO reserve for the year ended December 31, 2013. The expected decrease in the LIFO reserve for 2013 reflects lower anticipated costs, especially scrap steel costs. A 1.0% increase in costs would increase the current LIFO expense estimate for 2013 by $5.8 million. A 1.0% increase in inventory quantities would have no effect on the current LIFO expense estimate for 2013.