New for Fiscal 2016

In response to the Say-on-Pay vote at the 2015 Annual Meeting, we initiated significant shareholder outreach in order to obtain input from our shareholders regarding the Company’s executive compensation program. We reached out to investors holding approximately 70% of our outstanding shares as of March 31, 2015, and had discussions, either by phone or in person, with investors holding nearly 50% of outstanding shares. All of these discussions involved both the Chairs of the Compensation Committee and the Board of Directors, and the input received was very helpful as the Compensation Committee considered potential changes to the executive compensation plans. Follow-on calls with investors were also held as the fiscal 2016 plans were being finalized.

The compensation plans for fiscal 2015 were put in place in the fall of 2014 prior to the Say-on-Pay vote in January 2015; therefore the fiscal 2015 compensation plans did not reflect the input from our post-vote outreach. However, directly as a result of the valuable feedback received from shareholders, the Compensation Committee made several significant changes to our executive compensation program for fiscal 2016. The following changes to our compensation program are effective beginning in fiscal 2016:

In addition, in recognition of current market conditions, the Compensation Committee took the following actions for fiscal 2016:

In fiscal 2015, our markets continued to be adversely impacted by the slowdown of economic activity globally. The macroeconomic uncertainty, combined with global steel-making overproduction, lower iron ore prices, and strengthening of the U.S. dollar, resulted in deteriorating market conditions for global steel manufacturers and accelerated the downward trend in commodity prices and in the demand for ferrous and nonferrous recycled metal. During fiscal 2015, selling prices for recycled ferrous metal experienced several periods of sharp declines, with prices at the end of fiscal 2015 being approximately 40% lower than the levels at the end of fiscal 2014. Lower sales volumes of recycled ferrous and nonferrous metal at our Auto and Metals Recycling (“AMR”) business were only partially offset

by higher sales volumes of finished steel products at our Steel Manufacturing Business (“SMB”).

Amid these headwinds, we undertook deliberate and substantial steps to lower our operating costs and improve our productivity. As a result of these initiatives and our continued focus on working capital management, we increased our free cash flow by 12% year-over-year, we reduced our SG&A expenses by 9% year-over-year, and we ended the year with net debt at our lowest level since the end of fiscal 2011 while continuing to return capital to our shareholders through our quarterly dividend and share repurchases. Our fiscal 2015 accomplishments included:

As a result of the challenging macro-economic conditions, our industry has been experiencing a cyclical trough, and our stock price and market capitalization have been deeply impacted. Our TSR for fiscal 2015 was a negative 35% and our three-year TSR was a negative 12% per annum. Our current directors and executive officers, as a group, own about 900,000, or approximately 3%, of our outstanding shares and have also experienced the impact of these results.

Fiscal 2015 Compensation Summary

Our fiscal 2015 compensation program links pay to performance and also reflects the impact of the challenging market conditions and impact of our stock price on realizable pay. As a result of this linkage of pay to performance, actual compensation in fiscal 2015 was lower than target levels as represented by the following:

We are providing you with this proxy statement because the Board is soliciting your proxy to vote at the Annual Meeting of Shareholders to be held on January 27, 2016 or any adjournments thereof. You are invited to attend the Annual Meeting, and we request that you vote on the proposals described in this proxy statement. You do not need to attend the meeting to vote your shares. If you have received a printed copy of these materials by mail, you may simply complete, sign, and return your proxy card or follow the instructions

below to vote your shares by proxy over the telephone or through the Internet. If you did not receive a printed copy of these materials by mail and are accessing them on the Internet, you may simply follow the instructions below to vote your shares by proxy through the Internet. For shares held through a broker, bank, or nominee, you may vote by submitting voting instructions to your broker or nominee, or by obtaining a proxy executed in your favor from the shareholder of record (broker, bank, or nominee).

In accordance with rules and regulations adopted by the Securities and Exchange Commission (“SEC”), instead of mailing a printed copy of our proxy materials to each shareholder of record we may furnish proxy materials to our shareholders over the Internet. We believe this is a more cost-effective and environmentally-sensitive way to provide our shareholders with this information. If you received a Notice by mail, you will not receive a printed copy of the proxy materials.

Instead, the Notice will instruct you as to how you may access and review all of the important information contained in the proxy materials. The Notice will also instruct you as to how you may submit your proxy over the Internet. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice.

The only matters scheduled for a vote are the election of the three nominated directors listed herein, the advisory vote on executive compensation described in this proxy statement,

and the vote to ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal 2016.

The Board recommends that you vote FOR each of the nominees to the Board, FOR the advisory vote on executive compensation, and FOR the ratification of the selection of

PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal 2016.

Shareholders at the close of business on December 1, 2015 (the “Record Date”) will be entitled to vote at the Annual Meeting. Holders of Class A common stock and Class B common stock will vote together as a single class on all matters at the Annual Meeting. Each share of common stock (whether Class A or Class B) is entitled to one vote with respect to each matter to be voted on at the Annual Meeting. You have one vote for each share of common stock held by you as of the Record Date, including shares:

If, at the close of business on December 1, 2015, your shares were held in an account at a brokerage firm, bank, dealer, or other similar organization, then you are the beneficial owner of shares held in “street name,” and the Notice or other proxy materials, as applicable, are being forwarded to you by that organization. The organization holding your account is considered the shareholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct that organization on how to vote the shares in your account. If your shares are held by a broker and you do not indicate how you wish to vote, your broker is permitted to exercise its discretion to vote your shares only on certain “routine” matters (“broker discretionary voting”). Proposal No. 3 with respect to the

ratification of the selection of the Company’s independent registered public accounting firm is a “routine” matter, and your broker is permitted to exercise discretionary voting authority to vote your shares on this proposal. Unless you provide your broker with voting instructions, your broker may not exercise discretionary voting authority and may not vote your shares with respect to the election of directors (Proposal No. 1) or the advisory vote related to executive compensation (Proposal No. 2). See the discussion of “broker non-votes” below. We strongly encourage you to submit your voting instructions and exercise your right to vote as a beneficial owner of shares. If you want to vote your shares in person, you will need to obtain a proxy executed in your favor from the shareholder of record.

If you are a shareholder of record, you may vote using any of the following methods:

We provide Internet proxy voting to allow you to vote your shares on-line, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. While there is no specific charge or cost to you for voting by Internet, please be aware that you must bear any costs associated with your Internet access, such as usage charges from Internet access providers and telephone companies.

Internet and telephone voting facilities will close at 11:59 pm (Central time) on January 26, 2016 for the voting of shares.

If you are a shareholder of record and return a signed and dated proxy card without marking any voting selections, your shares will be voted “FOR” the election of each of the nominees for director set forth in this proxy statement, “FOR” the advisory resolution on executive compensation, and “FOR” the ratification of the selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for fiscal 2016. If any other matter is properly presented at the meeting, your proxy (one of the individuals named on your proxy card) will vote your shares using his or her best judgment.

If you are a beneficial owner of shares held in street name and return signed and dated voting instructions without marking

any voting selections, your shares may be voted at the discretion of your broker with respect to the ratification of the selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for fiscal 2016 (Proposal No. 3) but may not be voted with respect to the election of the nominees for director (Proposal No. 1) or the advisory vote related to executive compensation (Proposal No. 2). If any matter which is considered routine is properly presented at the meeting, your proxy (one of the individuals named on the proxy card) will vote your shares using his or her best judgment. Please return your voting instructions with your voting selections marked so that your vote can be counted.

Holders of Class A common stock and Class B common stock will vote together as a single class on all matters voted on at the Annual Meeting, and each share is entitled to one vote. A majority of the total outstanding shares of Class A and Class B common stock must be present or represented by proxy to

constitute a quorum at the Annual Meeting. Shares voted by proxy on any matter (including shares voted pursuant to a broker’s discretionary voting authority) are counted as present at the meeting for purposes of determining a quorum.

The election of directors (Proposal No. 1) will be determined by a plurality of the votes cast by the shares entitled to vote in the election at the meeting, assuming a quorum is present. A plurality vote requirement means that the three director nominees with the greatest number of votes cast, even if less than a majority, will be elected. There is no cumulative voting.

The advisory vote on executive compensation (Proposal No. 2) will be approved if the votes cast favoring the proposal exceed the votes cast opposing the proposal. While the vote

on executive compensation (Proposal No. 2) is advisory in nature and non-binding, the Board will review the voting results and expects to take them into consideration when making future decisions regarding executive compensation.

The ratification of the selection of the independent registered public accounting firm (Proposal No. 3) will be approved if the votes cast favoring the proposal exceed the votes cast opposing the proposal.

With respect to the election of directors, you may vote “FOR” or “WITHHOLD” with respect to each nominee. Votes that are withheld will be excluded entirely from the vote with respect to the nominee from which they are withheld. Votes that are withheld will not have any effect on the outcome of the election of directors.

You may vote “FOR”, “AGAINST”, or “ABSTAIN” with respect to the advisory vote on executive compensation (Proposal No. 2) and the vote on the ratification of the selection of the independent registered public accounting firm (Proposal No. 3). For Proposal No. 2 and Proposal No. 3, abstentions will not have any effect on the outcome of the vote.

A broker who holds shares for a beneficial owner has the discretion to vote on “routine” proposals when the broker has not received voting instructions from the beneficial owner. A “broker non-vote” occurs when shares held by a broker are

not voted with respect to a proposal because (1) the broker

has not received voting instructions from the shareholder who beneficially owns the shares and (2) the broker lacks discretionary authority to vote the shares for that particular matter. Each of Proposal No. 1 (election of directors) and Proposal No. 2 (advisory vote on executive compensation) are

considered to be non-routine matters, and brokers therefore lack discretionary authority to vote shares on such matters at this meeting. Broker non-votes, like other shares that are not

voted at the meeting, have no effect on the outcome of the vote on such matters.

Yes. You can revoke your proxy at any time before the final vote at the meeting. You may revoke your proxy in any one of the following five ways:

The record date for determining shareholders entitled to receive notice of and to vote at the Annual Meeting was December 1, 2015. At the close of business on December 1, 2015, a total of 26,745,463 shares of our common stock, par value $1.00 per share, were outstanding and entitled to vote at the Annual Meeting. The outstanding common stock consisted of 26,439,563 shares of Class A common stock (Class A) and 305,900 shares of Class B common stock (Class B). Each share of common stock (whether Class A or Class B) is entitled to one vote with respect to each matter to be voted on at the Annual Meeting.

The following table sets forth certain information regarding the beneficial ownership of our common stock as of November 30, 2015 (unless otherwise noted in the footnotes to the table) by (i) persons known to us to be the beneficial owner of more than 5% of our common stock, (ii) each of our current directors, (iii) each nominee for director, (iv) each of

our executive officers listed in the Summary Compensation Table (each, a “named executive officer” and collectively the “named executive officers”), and (v) all of our current directors and executive officers as a group. Unless otherwise noted in the footnotes to the table, the persons named in the table have sole voting and investment power with respect to all outstanding shares of common stock shown as beneficially owned by them. Except as noted below, the address of each shareholder in the table is c/o Schnitzer Steel Industries, Inc., P.O. Box 10047, Portland, Oregon 97296-0047. Each Class B share is convertible into one Class A share, and there are no meaningful distinctions between the rights of holders of Class A shares and Class B shares. Accordingly, the following table reports beneficial ownership of common stock in the aggregate and does not distinguish between Class A shares and Class B shares.

Section 16(a) of the Securities Exchange Act of 1934 requires our directors, executive officers, and persons who beneficially own more than 10% of our outstanding common stock to file with the SEC reports of beneficial ownership and changes in beneficial ownership of our common stock held by such persons. Executive officers, directors, and greater than 10% shareholders are also required to furnish us copies of all forms they file under this regulation. To our knowledge, based solely

on a review of the copies of such reports furnished to us and representations that no other reports were required, during fiscal 2015, we believe that all required Section 16(a) reports were timely filed for such fiscal year, except that Mr. Hicks made one late filing on Form 4 related to 1,000 shares acquired in three transactions on January 20, 2015, which transactions were reported on a Form 4 filed on January 23, 2015, one day late.

Thomas D. Klauer, Jr., who had been President of the Company’s former Auto Parts Business prior to his retirement on January 5, 2015, is the sole shareholder of a corporation that is the 25% minority partner in a partnership in which we are the 75% partner and which operates five self-service stores in Northern California. Mr. Klauer’s 25% share of the profits of this partnership totaled $1,217,087 in fiscal 2015. We and a company owned by Mr. Klauer jointly own the real property at one of these stores, which is leased to the partnership. In fiscal 2015, Mr. Klauer’s share of the rent paid by the partnership was $282,836. The term of this lease expires in December 2020, and the partnership has the option to renew the lease, upon its expiration, for multiple five-year periods. Rent under the lease is adjusted annually based on the Consumer Price Index. Also in fiscal 2009, Mr. Klauer, through a company of which he is the sole shareholder, acquired ownership of a contiguous parcel of real property, a portion of which is leased to the partnership. The term of this lease expires in December 2020, and the partnership has the option to renew the lease, upon its expiration, for multiple five-year periods. Rent under the lease is adjusted annually based on the Consumer Price Index. The rent paid by the partnership to Mr. Klauer’s company in fiscal 2015 for this parcel was $266,342.

Certain members of the Schnitzer family, including Kenneth M. Novack who was a director until January 2015 and members of his immediate family, have significant interest in, or are related to owners of, MMGL Corp. (formerly Schnitzer Investment Corp.) (“MMGL”), which is engaged in the real estate business and was a subsidiary of the Company prior to 1989. The

Company and MMGL are both potentially responsible parties with respect to Portland Harbor, which has been designated as a Superfund site since December 2000. The Company and MMGL have worked together in response to Portland Harbor matters and, prior to 2009, the Company paid all of the legal and consultant fees for the joint defense, in part due to its environmental indemnity obligation to MMGL with respect to the Portland scrap operations property which is adjacent to the Portland Harbor. In 2009, we agreed with MMGL to an equitable cost sharing arrangement with respect to defense costs under which MMGL pays 50% of the legal and consultant costs, net of insurance recoveries. The amounts receivable from (payable to) MMGL vary from period to period because of the timing of incurring legal and consulting fees, payment for cost reimbursements and insurance recoveries. As of January 2015, Mr. Novack was no longer a member of the Company’s Board of Directors and, thus, MMGL ceased being a related party. Amounts receivable from MMGL under the cost sharing agreement were $238,431 at August 31, 2015.

The Audit Committee charter requires the Audit Committee to review any transaction or proposed transaction with a related person, or in which a related person has a direct or indirect interest, and determine whether to ratify or approve the transaction, with ratification or approval to occur only if the Audit Committee determines that the transaction is fair to the Company or that approval or ratification of the transaction is in the interest of the Company. The Audit Committee has reviewed and approved or ratified each of the foregoing transactions.

We are asking shareholders to elect the three individuals nominated by the Board, each of whom is a current director.

The Board currently consists of nine members divided into three classes pursuant to our 2006 Restated Articles of Incorporation and Restated Bylaws. One class of directors is elected each year for a three-year term. The term of Class I directors expires at the 2016 annual meeting; the term of Class II directors expires at the 2017 annual meeting; and the term of Class III directors expires at the 2018 annual meeting. Generally, the terms of directors continue until their respective successors are duly elected and qualified.

Action will be taken at the 2016 annual meeting to elect one Class III director to serve until the 2018 annual meeting of shareholders and two Class I directors to serve until the 2019 annual meeting of shareholders. William A. Furman, a current

Class I director, has not been re-nominated for election as a director, and his term as a director will end at the 2016 annual meeting. The Board of Directors has approved a decrease in the number of directors from 9 to 8 effective immediately prior to the 2016 annual meeting.

The nominees for election at the 2016 annual meeting are Michael W. Sutherlin as a Class III director and David L. Jahnke and William D. Larsson as Class I directors. The Board has determined that each of Messrs. Sutherlin, Jahnke, and Larsson qualifies as an independent director under our Corporate Governance Guidelines, SEC rules, and NASDAQ requirements. If any nominee is unable to stand for election, the persons named in the proxy will vote the proxy for a substitute nominee in accordance with the recommendation of the Board. We are not aware of any nominee who is or will be unable to stand for election.

Holders of Class A Common Stock and Class B Common Stock will vote together as a single class on this matter, and each share is entitled to one vote for each director nominee. Directors are elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and

entitled to vote on the election of directors. Proxies received from shareholders of record, unless directed otherwise, will be voted FOR the election of each of the nominees. Abstentions and broker non-votes will have no effect on the results of the vote.

The Board of Directors recommends that shareholders vote “FOR” the election of each

of the nominees named above.

The Company is committed to strong corporate governance. The Company is governed by a Board of Directors and Committees of the Board that meet throughout the year. Directors discharge their responsibilities at Board and Committee meetings and also through other communications with management.

Our Board of Directors has an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee (the “N&CG Committee”), each of which has a written charter adopted by the Board of Directors, copies of which are posted on our website at www.schnitzersteel.com. The Board of Directors has also adopted Corporate Governance Guidelines which are posted on our website. Under our Corporate Governance Guidelines,

committee members are appointed annually and the chairs of and director membership on committees are periodically rotated based on the skills, desires, and experiences of the members of the Board.

Director Independence

The Board of Directors has determined that David J. Anderson, William A. Furman, Wayland R. Hicks, David L. Jahnke, Judith A. Johansen, William D. Larsson, and Michael W. Sutherlin are “independent directors” as defined by our Corporate Governance Guidelines and NASDAQ listing requirements. Accordingly, a majority of the directors have been determined to be independent directors. The independent directors regularly meet in executive sessions at which only independent directors are present.

During fiscal 2015, the Board of Directors held four meetings, the Audit Committee held nine meetings, the Compensation Committee held five meetings, and the N&CG Committee held four meetings. Each director attended at least 75% of the aggregate number of meetings of the Board and committees of the Board on which he or she served that were held during the period for which he or she served. We encourage all directors to attend each annual meeting of shareholders, and all directors then serving attended the 2015 Annual Meeting.

Board Leadership

The current Board leadership structure separates the role of Chairman and CEO. These roles have been separate since May 2005 and the Board and the N&CG Committee have determined that the current structure continues to be appropriate as it enables the CEO to focus on the complexities and challenges of the role as our chief executive officer while enabling the Board Chairman to provide leadership at the Board level. This leadership structure also enables the Board to better fulfill its risk oversight responsibilities, as described

under “The Board’s Role in Risk Oversight”. The Board periodically assesses its leadership structure in light of the Company’s needs and circumstances.

The Board also has a lead director, who is an independent director. Under our Corporate Governance Guidelines, the lead director role is periodically rotated among the independent directors. As of September 1, 2014, Mr. Hicks replaced Mr. Larsson as lead director. Mr. Larsson had been the lead director since the position was created in November 2008. The lead director’s responsibilities include: facilitating effective communication between the Board and management; consulting with the Chairman and the CEO; discussing annually with the Chairman of the Board and the Chair of the Compensation Committee the CEO’s performance, development, and compensation; and presiding at meetings of the Board when the Chairman is not present, including executive sessions of the independent directors. The lead director generally attends all meetings of the Board’s committees.

The Audit Committee represents and assists the Board in oversight of our accounting and financial reporting processes and the audits of our financial statements; appointing, approving the compensation of, and overseeing the independent auditors; reviewing and approving all audit and non-audit services performed by the independent auditors; reviewing the scope and discussing the results of the audit

with the independent auditors; reviewing management’s assessment of the Company’s internal controls over financial reporting; overseeing the Company’s compliance program; overseeing the Company’s internal audit function; and reviewing and approving, as appropriate, all transactions of the Company with related persons (see “Certain Transactions”).

The Compensation Committee has overall responsibility for the administration of the Company’s executive and director compensation plans and equity-based plans; overseeing and evaluating the performance of the CEO and determining the CEO’s compensation; administering and interpreting executive compensation plans, the Company’s stock plans, and all other equity-based plans from time to time adopted by the Company, including our 1993 Amended and Restated Stock Incentive Plan (“SIP”); determining the compensation of the

other executive officers; in consultation with the N&CG

Committee, reviewing and recommending to the Board for approval compensation for members of the Board, including compensation paid to the Chairman, Lead Director and committee chairs; and overseeing the preparation of executive compensation disclosures included in the Company’s proxy statement in accordance with the SEC rules and regulations. For a description of the Committee’s activities regarding executive compensation, refer to the “Compensation Discussion and Analysis.”

The N&CG Committee has responsibility for identifying, selecting, and recommending to the Board individuals proposed to be (i) nominated for election as directors by the shareholders or (ii) elected as directors by the Board to fill vacancies; working with the Chairman of the Board and the Lead Director, seeking to ensure that the Board’s committee structure, committee assignments, and committee chair assignments are appropriate and effective; developing and

recommending to the Board for approval, and reviewing from time to time, a set of corporate governance guidelines for the Company, which includes a process for the evaluation of the Board, its committees, and management; developing and maintaining director education opportunities; and monitoring compliance with the corporate governance guidelines adopted by the Board.

The N&CG Committee uses a Board composition matrix to inventory the expertise, skills, and experience of each director to ensure that the overall Board maintains a balance of knowledge and relevant experience. The N&CG Committee carefully reviews all director candidates, including current directors, based on the current and anticipated composition of the Board, our current and anticipated strategy and operating requirements, and the long-term interests of shareholders. In assessing current directors and potential candidates, the N&CG Committee considers the character, background, and professional experience of each current director and potential candidate. In its evaluation of potential candidates, the N&CG Committee applies the criteria set forth in our Corporate Governance Guidelines and considers the following factors:

In considering the re-nomination of incumbent directors, the N&CG Committee also takes into account the performance of such persons as directors, including the number of meetings attended and the level and quality of participation, as well as the value of continuity and knowledge of the Company gained

through Board service. The N&CG Committee strives to achieve diversity on the Board by considering skills, experience, education, length of service on the Board, and such other factors as it deems appropriate. The N&CG Committee and the Board define diversity broadly to include the background, professional experience, skills, and viewpoints necessary to achieve a balance and mix of perspectives. In addition, the N&CG Committee annually conducts a self-assessment of the Board, each Board committee, and each committee member to evaluate, among other things, the Board’s diversity.

Director Nominations

The N&CG Committee identifies potential director candidates through a variety of means, including recommendations from members of the Board, suggestions from Company management, and shareholder recommendations. The N&CG Committee also may, in its discretion, engage director search firms to identify candidates. Shareholders may recommend director candidates for consideration by the N&CG Committee by submitting a written recommendation to the N&CG Committee, c/o Corporate Secretary, Schnitzer Steel Industries, Inc., P.O. Box 10047, Portland, Oregon 97296-0047. The recommendation should include the candidate’s name, age, qualifications (including principal occupation and employment history), and written consent to be named as a nominee in our proxy statement and to serve as a director, if elected. All recommendations for nomination received by the Secretary that satisfy our bylaw requirements relating to such director nominations will be presented to the N&CG Committee for its consideration.

The N&CG Committee meets to discuss and consider the qualifications of each potential new director candidate, whether recommended by shareholders or identified by other means, and determines by majority vote whether to

recommend such candidate to the Board of Directors. The final decision to either elect a candidate to fill a vacancy between annual meetings or include a candidate on the slate of nominees proposed at an annual meeting is made by the Board of Directors. In considering the current directors, including the director nominees proposed for election at the Annual Meeting, the N&CG Committee and the Board specifically considered the background, experiences, and qualifications described in their biographies appearing under “Election of Directors” in this proxy statement.

Director Tenure

We do not have a fixed retirement age for directors. Under our Corporate Governance Guidelines, a director is required to submit a written resignation to the Board, to be effective at the end of the director’s then current term, when the director begins his or her 15^th year of service on the Board. The Board may accept or reject the tendered resignation after considering the recommendation of the N&CG Committee as to the appropriateness of the director’s continued membership on the Board.

The Board’s Role in Risk Oversight

We have a comprehensive enterprise risk management process in which management is responsible for managing the Company’s risks and the Board and its committees provide oversight of these efforts. Our Chief Risk Officer reports to our CEO, is responsible for the risk management program, and provides periodic reports to the Board. Risks are identified, assessed, and managed on an ongoing basis and communicated to management during management meetings or otherwise as appropriate. Existing and potential material risks are reviewed during periodic executive management and/or Board meetings, resulting in Board and/or Board committee discussion and public disclosure, as appropriate.

The Board is responsible for overseeing management in the execution of its risk management responsibilities and for assessing the Company’s approach to risk management. The Board administers this risk oversight function either through the full Board or through its standing committees.

Assessment of Compensation Risk

Management and the Compensation Committee conducted an assessment of the risks associated with our compensation programs and determined that they do not create risks which are reasonably likely to have a material adverse impact on us. In conducting the evaluation, the Compensation Committee, with the assistance of Pearl Meyer & Partners, its compensation consultant, reviewed our compensation structure and noted numerous ways in which risk is effectively managed or mitigated, including:

In addition, the Compensation Committee analyzed the overall enterprise risks and how compensation programs could impact individual behavior that could exacerbate these enterprise risks.

Additionally, we obtained advice from Towers Watson, the Company’s compensation consultant, in designing our incentive plans (executive and broad-based) to determine if any practices might encourage excessive risk-taking on the part of senior executives. Several of the features of, and practices related to, our incentive plans (executive and broad-based) mitigate risk, including the use of multiple measures in our annual and long-term incentive plans, Compensation Committee discretion in payment of incentives in the executive plans, use of multiple types of long-term incentives, payment caps, significant stock ownership guidelines, and our anti-hedging policy for Company stock. In light of these analyses, the Committee believes that the architecture of our compensation programs (executive and broad-based) provide multiple, effective safeguards to protect against undue risk.

Anti-Hedging Policy for Company Stock

Our stock trading policy, applicable to our directors and employees, prohibits engaging in any short sale of our stock, establishing or using a margin account with a broker-dealer for the purpose of buying or selling our stock or using it as collateral therefor, or buying or selling puts, calls, prepaid variable forward contracts, equity swaps, collars, exchange funds, or other instruments or derivatives designed to hedge the value of our stock.

Communication with Directors

Shareholders and other interested parties may communicate with any of the directors, including our lead independent director, by using the following address:

Board of Directors

Schnitzer Steel Industries, Inc.

299 SW Clay Street, Suite 350

Portland, OR 97201

The annual fee for non-employee directors is $70,000 ($105,000 for the Lead Director). We do not pay fees for attendance at Board and committee meetings. The annual cash retainer for the Chairs of the Audit and Compensation Committees is $10,000 and for the Chair of the N&CG Committee is $5,000.

In 2004, directors began participating in the Company’s SIP, and in 2004 and 2005 non-employee directors received stock option grants. Since August 2006, non-employee directors have been awarded DSUs instead of stock options. One DSU gives the director the right to receive one share of Class A common stock at a future date (as described in footnote 2 above). At each annual meeting of shareholders, each non-employee director receives DSUs for a number of shares equal to $120,000 divided by the closing market price of the Class A common stock on the grant date.

Pursuant to the Corporate Governance Guidelines, directors are expected to make significant progress annually toward accumulating, within five years of becoming a director, common shares of the Company with a value equal to five times the director’s annual cash retainer.

Non-employee directors may elect to defer all or part of their compensation under the Deferred Compensation Plan for Non-Employee Directors, which was adopted by the Board in 2006. Directors’ cash fees are credited to a cash account or a stock account, as selected by the director. Payments from the cash account are paid in cash, and payments from the stock account are paid in Class A common stock. The cash account is credited with quarterly interest equal to the average interest rate paid by us under our senior revolving credit agreement (or if there are no borrowings in a quarter, at the prime rate) plus two percent. The stock account is credited with additional whole or partial shares reflecting dividends that would have been paid on the shares. Deferred amounts are

paid in a single payment or in equal annual installment payments for up to 15 years commencing in January following the date the director ceases to be a director. DSUs are credited to the directors’ stock accounts under the plan when the DSUs become vested, and the awards are administered under the plan. A director may elect to receive stock under a DSU in equal annual installment payments for up to 15 years commencing in January following the date the director ceases to be a director.

Mr. Carter served as the Company’s CEO until December 2008, when he was succeeded in that position by our current CEO, Ms. Lundgren. At that time, Mr. Carter entered into an amended and restated employment agreement with the Company to serve as our Chairman of the Board, which agreement has been further amended. Pursuant to an amendment in November 2012, (a) commencing December 29, 2012, Mr. Carter received an annual fee of $500,000, payable quarterly in arrears, for service as non-employee Chairman and became ineligible for other compensation paid to non-employee directors, (b) receives continuation of health insurance benefits for 60 months following his retirement, and (c) his outstanding stock options were amended to postpone termination by treating continued board service through December 31, 2014 as if it were continued employment. On October 29, 2014, Mr. Carter and the Committee agreed to further amend Mr. Carter’s employment agreement to (1) continue the term of his service as Chairman through December 31, 2017 and (2) reduce his annual fee to $300,000 effective January 1, 2015.

We have entered into indemnity agreements with each director pursuant to which we agree to indemnify such director in connection with any claims or proceedings involving the director by reason of serving as a director of the Company, as provided in the agreement.

This Compensation Discussion and Analysis provides a detailed description of our executive compensation philosophy and programs, the decisions that the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) have made under those programs, and the factors

considered in those decisions. This Compensation Discussion and Analysis focuses on the compensation of our NEOs for fiscal 2015 disclosed in the tables below. The NEOs are listed below.

At our 2015 annual meeting of shareholders, our advisory vote on NEO compensation, referred to as our Say-on-Pay vote, did not pass. The 2015 vote outcome represented a reversal compared to prior year votes.

The 2015 Say-on-Pay vote was taken very seriously by the Company, our Board of Directors, and our Compensation Committee. As a result of the vote, the Company reached out to investors holding approximately 70% of our outstanding shares as of March 31, 2015, and had discussions, either by phone or in person, with investors holding nearly 50% of outstanding shares. All of these discussions involved both the Chairs of the Compensation Committee and the Board of Directors, and the input received was very helpful as the Compensation Committee considered potential changes to the

executive compensation plans. Follow-on calls with investors were also held as the fiscal 2016 plans were being finalized.

The purpose of the outreach was to listen to shareholder views on executive compensation and understand the concerns expressed by the 2015 Say-on-Pay vote. Although investors expressed differing views, we valued the insights gained from these discussions and found them to be helpful as we considered compensation policies affecting our NEOs. At the time of the 2015 vote, we had already put in place the short-term and long-term compensation plans for fiscal 2015; however, the Company has made a number of substantial changes to its executive compensation program that are effective for fiscal 2016 to address the concerns raised by shareholders during this outreach.

Our executive compensation program is aligned with our business strategy and with creating long-term shareholder value by paying for performance consistent with an acceptable risk profile. The foundation of our compensation philosophy is to:

Our executive compensation program emphasizes delivering compensation at a competitive market level which will allow

executive officers who demonstrate consistent on-target performance over a multi-year period to earn compensation that is competitive and consistent with targeted performance levels of total compensation. For executives where performance is above target over the long term, we believe the program will reward above the competitive median. Conversely, the program will provide less than the annual target compensation when performance does not meet expectations. Individual executive compensation may be above or below the annual target level, based on the Company’s performance; economic and market conditions; the individual’s performance, contribution to the organization, experience, expertise, and skills; and other relevant factors.

Our Executive Compensation Practices. Set forth below is a summary of our executive compensation practices.

In fiscal 2015, our markets continued to be adversely impacted by the slowdown of economic activity globally. The macroeconomic uncertainty, combined with global steel-making overproduction, lower iron ore prices, and strengthening of the U.S. dollar, resulted in deteriorating market conditions and accelerated the downward trend in commodity prices and in the demand for ferrous and nonferrous recycled metal. During fiscal 2015, selling prices for recycled ferrous metal experienced several periods of sharp declines, with prices at the end of fiscal 2015 being approximately 40% lower than the levels at the end of fiscal 2014. Lower sales volumes of recycled ferrous and nonferrous metal at our Auto and Metals Recycling business (“AMR”) business were only partially offset by higher sales volumes of finished steel products at our Steel Manufacturing Business (“SMB”).

Amid these headwinds, we undertook deliberate and substantial steps to lower our operating costs and improve our productivity. As a result of these initiatives and our continued focus on working capital management, we increased our free cash flow by 12%⁽¹⁾ year-over-year, we reduced our SG&A expenses by 9% year-over-year, and we ended the year with net debt at our lowest level since the end of fiscal 2011 while continuing to return capital to our shareholders through our quarterly dividend and share repurchases. Following is a summary of our fiscal 2015 accomplishments, more detail can be found in our Annual Report on Form 10-K.

Our executive compensation program is designed to pay for performance, therefore actual compensation in fiscal 2015 was lower than target levels, which reflected alignment with the Company’s financial performance during the period as represented by the following:

Role of the Compensation Committee. The Committee is responsible for:

The Committee cannot delegate this authority. The Committee regularly reports its activities to the Board.

The Committee is comprised of five directors, each of whom has been determined by the Board to be independent under our Corporate Governance Guidelines, applicable SEC and NASDAQ rules, and IRS regulations. Currently, the members of the Committee are Judith A. Johansen, Chair, David J. Anderson, Wayland R. Hicks, David L. Jahnke, and Michael W. Sutherlin.

The Committee operates pursuant to a written charter (available on the Company’s website at http://www.schnitzersteel.com/documents/compensation-committee-charter-jan-2014.pdf) which is reviewed by the Committee on an annual basis and approved by the Board. The Committee meets at least quarterly and more frequently as circumstances require, including in executive session with the Committee’s independent compensation consultant. In fiscal 2015, in response to the results of the shareholder Say-on-Pay vote, in addition to its regularly scheduled five formal meetings, the Chair of the Committee participated in shareholder outreach and the Committee engaged in additional meetings to consider changes to the Company’s executive compensation program to address shareholder concerns. In the first quarter of fiscal 2016, the Committee had six meetings, in person or by teleconference call, to discuss and act on the fiscal 2015 compensation results and the re-design of the fiscal 2016 compensation program, frequently requesting additional information and follow-up from both management and the Committee’s independent compensation consultant.

Use of Compensation Consultants. The Committee has authority to retain compensation consultants to assist it in the evaluation of executive officer and employee compensation and benefit programs. The Committee directly retained Pearl Meyer & Partners (“PM&P”) as its compensation consultant

for fiscal 2015. In fiscal 2015, PM&P performed, among others, the following services for the Committee:

The Committee’s independent compensation consultant provides information and data to the Committee from its surveys, proprietary databases and other sources, which the Committee utilizes along with information provided by management and obtained from other sources. In making its decisions, the Committee reviews such information and data provided to it by its independent compensation consultant and management and also draws on the knowledge and experience of its members as well as the expertise and information from within the Company, including from the human resources, legal, and finance groups. The Committee considers executive and director compensation matters at its quarterly meetings and at special meetings as needed based on our annual compensation schedule.

PM&P and its affiliates did not perform any additional services for the Company or any of its affiliates in fiscal 2015.

Separately, the Company retains Towers Watson to provide management with compensation data for the Company’s broader executive group and for services in administering the compensation plans. During fiscal 2015, Towers Watson assisted management with data with respect to both the Company’s peer group and executive compensation.

CEO’s Role in the Compensation-Setting Process. The CEO, with the assistance of Towers Watson, makes recommendations to the Committee regarding compensation for the other NEOs. The CEO participates in Committee meetings at the Committee’s request to provide background information regarding our strategic objectives and to evaluate the performance of and make compensation recommendations for the other NEOs. The Committee utilizes

the information provided by the CEO along with other information from within the Company, input from its independent compensation consultant, and the knowledge and experience of the Committee members in making compensation decisions. The Chair of the Committee recommends the CEO’s compensation to the Committee in executive session, not attended by the CEO.

Annual Evaluation. The Committee annually evaluates the performance of the NEOs with the input from the CEO and, in executive session, evaluates the performance of the CEO and determines the annual incentive bonuses for all of the NEOs for the prior fiscal year. The Committee also approves the NEOs’ performance objectives for the current fiscal year, reviews and, if appropriate, adjusts their base salaries and annual incentive plan targets, and considers and approves Long-Term Incentive Plan (“LTIP”) grants.

Performance Objectives. The Committee approved performance objectives for fiscal 2015 based, in part, on an active dialogue with the CEO regarding strategic objectives and performance targets. Metrics are tied to our strategic and business plans and to annual budgets reviewed by the full Board. Short-term management objectives, such as productivity improvements, are designed to achieve specific goals that are expected to drive long-term shareholder value. Metrics are analyzed and tested for reasonableness prior to Committee approval at the beginning of the performance period. The Committee actively evaluates the appropriateness of the financial measures used in incentive plans and the degree of difficulty in achieving specific performance targets.

Competitive Market Overview. While the Committee does not believe that it is appropriate to establish compensation levels based solely on benchmarking, it believes that information regarding pay practices at peer companies is useful in two respects. First, the Committee recognizes that our compensation practices must be competitive in the marketplace, and reviewing market pay practices provides a framework for assessing competitiveness. Second, marketplace information is one of the many factors that the Committee considers in assessing the reasonableness of compensation. Although the Committee considers compensation levels for executive officers of other companies, it does not mechanically apply the data but rather engages in a rigorous quantitative and qualitative review and weighing of the competitive information with other Company and

individual performance factors, such as our specific business strategy, financial situation, and performance, in making its compensation determinations.

There are few, if any, direct public market peers of an equivalent size. Accordingly, determining market comparisons requires a review of companies in auto and metals recycling and in steel manufacturing, as well as companies in the closely-related mining and raw materials businesses, and in broader industrial and financial markets from which we attract executive talent. In addition, as we interface with customers around the world, we seek specialized and top caliber executive officers from the broad national and international business executive pools. Proxy data from relevant companies, as well as input from both the Company’s and the Committee’s compensation consultants, are utilized. Total compensation is periodically compared to the competitive market in setting compensation for executive officers.

The Committee selected a peer group based on data provided by Towers Watson from its general industry compensation database for companies with revenues between $1 billion and $6 billion and comparable to our organization based on industry, size (revenue and market capitalization), and geography. The peer group includes companies from similar industries, including steel manufacturing, metals recycling, coal and consumable fuels, diversified metals and mining, and aluminum. Each year the peer group is reviewed based on current market metrics and, in fiscal 2015, there were no changes to the peer group.

Based on the feedback we received from our shareholder outreach, the Committee elected to adjust its peer group for fiscal 2016 to reflect current market capitalization and revenue parameters and to expand the qualitative assessment of potential compensation peers to focus on position in the value chain and exposure to international markets. For example, a company that manufactures or whose products are used to make high-value end-products would be less comparable to our business which buys, processes, and sells raw materials and produces intermediate-level products. As a result of our analysis, the Committee has made significant changes to our compensation peer group to include a broader array of companies in our industry while still maintaining similar size market cap and revenue demographics. We believe the revised peer group will provide a better comparison for compensation purposes.

As is the case for a number of companies in our peer group, the Committee has established a separate Performance Peer Group for purposes of the TSR metric in our fiscal 2016 three-year performance share awards. In developing the Performance Peer Group, we used a quantitative and qualitative approach similar to that used for selecting the compensation peer group while adding companies viewed as

traditional peers, who for reasons of size may not be appropriate for purposes of comparing compensation. The following table shows the companies in the compensation peer group used in fiscal 2015 as well as the separate revised compensation and performance peer groups to be used in fiscal 2016: