Market View. Aluminum Highlights. Week Ending: June 1, 2018 An update on industry activity and economic indicators. Follow us on:

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1 Market View Aluminum Highlights Week Ending: An update on industry activity and economic indicators By: Beau Walker, Department Leader, Market Intelligence and Projects Trane Energy Supply Services The views expressed in the Market View are those of the author and do not necessarily represent the views of the Aluminum Association After trading range-bound between $2.60 per MMBtu and $2.85 per MMBtu since late February, the NYMEX prompt-month natural gas contract broke out of this range to the upside over the past two weeks. The June contract settled on Tuesday at $2.875 per MMBtu, the highest monthly settle since the February contract settled at $3.631 earlier this year. July became the prompt trading contract on Wednesday and has traded as high as $2.998 per MMBtu since then, the highest prompt trade since January 31. A combination of above-average temperatures and below-average storage levels has led to the move higher. Above-average to extremely above-average temperatures blanketed much of the western, southern and eastern U.S. in May, pushing power generation demand, which is driven higher by increased air conditioning load, above year-ago levels. The early start to summer was aided by natural gas storage levels that are well below historical levels. Natural gas storage stands at 1,725 Bcf as of May 25, 32% below year-ago levels and 23% below the 5-year average. The bullish sentiment from a combination of increased air conditioning load and decreased storage is being offset by natural gas production. Domestic natural gas production averaged 79.9 Bcf/d in April, an all-time high, and continues to be one of the most bearish factors for pricing. With the summer cooling season upon us, traders will look to summer forecasts, especially in heavily populated-areas and those reliant on gas-fired generation, and to what extent production is expected to refill the lagging natural gas storage levels for market guidance. After a nearly year-long rally, both prompt-month West Texas Intermediate (WTI) and Brent crude oil seemed to have found a ceiling. Prompt-month WTI traded to a high of $72.83 per barrel on May 22 while Brent hit $80.50 per barrel on May 17, both the highest prompt-month trades for those contracts since December The contracts have formed a more sideways trading pattern since pulling back more than $5.00 per barrel from their highs and the Brent/WTI gap, the difference between the prices of the two contracts, is at its highest levels of the year as WTI has fallen at a faster pace than its counterpart. Domestic crude production, currently at a record high of MMBpd, is a big driver of WTI s recent decline while the comments from Saudi Arabia and Russia surrounding the potential to increase production is leading Brent s move lower. Follow us on:

2 Industry Activity 2 May 31 The U.S. aluminum industry purchased an estimated 703 million pounds of aluminum scrap during March 2018, according to aluminum recycling statistics published by the U.S. Geological Survey, Department of Interior, down 5.9 percent from the March 2017 total. USGS estimates that recovery of aluminum and aluminum alloys totaled 669 million pounds, a decrease of 5.0 percent year-over-year. Through the first quarter of 2018, preliminary data indicate that recovery of aluminum from scrap totaled an estimated 1,936 million pounds, off 3.2 percent over year-to-date U.S. exports of scrap, not included in the government s consumption statistics, totaled 843 million pounds year-to-date, up 6.9 percent over like U.S. Secondary Recovery and Exports of Aluminum Scrap (Millions of Pounds) Rec. '17 Rec. '18 Exports '17 Exports '18 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec U.S. Geological Survey, U.S. Census Bureau 3,000 2,500 2,000 1,500 1, Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Estimated Aluminum Demand (Millions of Pounds) May 31 Preliminary estimates indicate that aluminum demand in the United States and Canada (shipments by domestic producers plus imports) totaled an estimated 7,134 million pounds through March 2018, up 4.7 percent over a year ago. Demand for semi-fabricated (mill) products totaled 5,071 million pounds, up 5.3 percent. Apparent consumption (demand less exports) in domestic markets totaled an estimated 6,291 million pounds, up 2.9 percent year-over-year. May 31 Aluminum net shipments (including exports) by domestic U.S. and Canadian facilities totaled an estimated 2,053 million pounds during April, up 4.3 percent over the April 2017 total of 1,969 million pounds. Shipments of aluminum mill products increased 5.8 percent over the previous year to 1,411 million pounds, while shipments of aluminum ingot for castings, exports and destructive uses advanced 1.0 percent year-over-year, totaling 642 million pounds. Through the first four months of the year, preliminary producer shipments totaled an estimated 8,250 million pounds, an increase of 2.7 percent over the 2017 year-to-date total. April inventory levels totaled an estimated 3,213 million pounds, up 1.8 percent over the previous month and an increase of 10.1 percent year-over-year. 2,500 2,000 1,500 1, Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Estimated Producer Shipments (Millions of Pounds)

3 Industry Activity Continued 3 Domestic Shipments of Powder and Paste Millions of Pounds * Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec, Inc. June 1 Shipments of Aluminum Powder and Paste to domestic markets by domestic producers, including imports by domestic producers, totaled 6.69 million pounds during April 2018, off 5.5 percent from the April 2017 total of 7.08 million pounds. Compared to the previous month, shipments decreased 13.6 percent from the March 2018 total of 7.75 million pounds. Year-to-date shipments through April 2018 totaled million pounds, up 7.6 percent over the 2017 year-to-date total of million pounds. Compared to April 2017, shipments of powder to domestic markets were off 6.8 percent to 5.75 million pounds, while shipments of paste were up 3.1 percent to 0.94 million pounds.

4 Economic Activity Statistics Canada Canada Industrial Product Price Index 2010=100 Industrial Product Price Index Alumina and aluminum production/processing May 30 Statistics Canada report that Canada s Industrial Product Price Index (IPPI) advanced fivetenths of one percent in April (117.4), following an increase of nine-tenths of one percent in March (r). The increase was largely a result of higher prices for energy and petroleum products (+4.5%). The IPPI excluding energy and petroleum products edged down one-tenth of one percent. Alumina and aluminum production prices increased 3.2 percent over March, and were up 8.3 percent over a year ago. The overall IPPI rose 2.4 percent during the 12- month period ending in April, matching the increase in March. May 30 U.S. real gross domestic product increased at an annual rate of 2.2 percent in the first quarter of 2018 according to the "second" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.9 percent. BEA emphasized that the first-quarter "second" estimate is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 2.3 percent. With this second estimate for the first quarter, the general picture of economic growth remains the same; downward revisions to private inventory investment, residential fixed investment, and exports were partly offset by an upward revision to nonresidential fixed investment Real GDP: Percent Change from Preceeding Quarter (1Q Advanced Estimate) 3.2 U.S. Bureau of Economic Analysis Seasonally Adjusted Annual Rates 1,775 1,750 1,725 1,700 1,675 1,650 1,625 Statistics Canada Canadian Real Gross Domestic Product (chained to 2007 Canadian dollars) All industries Manufacturing (R. axis) Seasonally Adjusted Annual Rate May 31 Statistics Canada reports that real GDP in Canada, increased three-tenths of one percent in March, as 15 of 20 industrial sectors increased. The growth was led by the mining, quarrying, and oil and gas extraction sector. This followed an increase of four-tenths of one percent in February. The output of goods-producing industries advanced six-tenths of one percent in March., while the output of servicesproducing industries edged up (+0.2%). Total manufacturing output rose one-tenth of one percent month-over-month. In durable manufacturing, 6 of 10 subsectors increased including transportation equipment (+1.2%), primary metal (+1.3%), miscellaneous (+2.8%) and wood products (+0.7%).

5 Economic Activity Continued M-14 A-14 N-14 F-15 M-15 A-15 N-15 F-16 M-16 A-16 N-16 F-17 M-17 A-17 N-17 F-18 M U.S. Census Bureau U.S. Value of Construction Put in Place ($USD in billions) Nonresidential Residential Seasonally Adjusted Annual Rate June 1 The U.S. Census Bureau of the Department of Commerce reported that the annual rate of construction spending during April 2018 totaled an estimated $1,310.4 billion, seasonally adjusted, an increase of 1.8 percent month-over-month, and up 7.6 percent over the April 2017 estimate of $1,217.7 billion. Residential construction ($563.4 billion seasonally adjusted annual rate) rose 4.4 percent month-over-month, and was up 9.7 percent yearover-year. Nonresidential construction was at a seasonally adjusted annual rate of $747.0 billion in April, essentially unchanged from March 2018 (+6.1% y/y). Construction spending through the first four months of 2018 totaled $387.0 billion, 6.6 percent above the $363.1 billion ytd June 1 Total nonfarm payroll employment increased by 223,000 in May, the U.S. Bureau of Labor Statistics reported. The unemployment rate declined from the April rate to 3.8 percent with job gains occurring in several industries, including retail trade, health care, and construction. Manufacturing employment increased by 18,000 jobs, the sector's tenth consecutive month of growth. That brings the average monthly change for the sector to 21,600 additional jobs over the last 12 months. In total, manufacturing employment has increased by roughly 259,000 jobs over the last year U.S. Bureau of Labor Statistics Month-to-Month Change in Manufacturing Employment (Thousands) M/M Change 12mo. Moving Avg. Seasonaly Adjusted 1,800 1,600 1,400 1,200 1, U.S. Light Vehicle Sales (Thousands of units) Light Vehicles 12-Month Average June 1 According to WardsAuto, U.S. light-vehicle sales totaled 1.58 million units in May 2018, an increase of 4.3 percent year-over-year. The daily sales rate in May was 60,043 over 26 days, ninetenths of one percent below the 2017 rate of 60,588 (25 days). May s seasonally adjusted annual rate of 16.8 million units, above the 16.7 million SAAR in same-month 2017 and the lowest result since August 2017 s 16.0 million outcome. Year-to-date 2018 sales totaled 7.0 million units, 1.4 percent above the like-2017 total of 6.9 million. WardsAuto This report is based on information reported to the Association by participants, which is aggregated by the Association. While the Association believes that its statistical procedures and methods are reliable, it does not warrant the accuracy or completeness of the data. All data contained herein are subject to revision. For further information, contact Ryan Olsen, V.P. Business Information and Statistics at or rolsen@aluminum.org., Inc. All rights reserved.

6 Global Activity 6 June 1 The Markit final U.S. Manufacturing Purchasing Managers Index (PMI) registered 56.4 in May, down fractionally from 56.5 in April. Latest survey data signaled a marked improvement in business conditions across the U.S. manufacturing sector in May. The strong performance reflected sharp expansions in output and new orders. Strong client demand meant operating capacity came under greater strain, with backlogs increasing at the fastest pace since September 2015 and supplier delivery times lengthening to the greatest extent on record. Strong demand for inputs contributed to a sharp rise in purchasing costs, which in turn fed through to a marked rise in output prices. June 1 The Markit Canada Manufacturing Purchasing Managers Index (PMI) posted 56.2 in May, up from 55.5 in April. The increase pointed to the strongest overall improvement in business conditions since April A faster rate of new order growth was a key factor behind the rise in the headline PMI during May, alongside a steeper upturn in pre-production inventories. The headline index has posted above the 50.0 no-change value in each month since March Production volumes increased at a marked pace in May, but the rate of output expansion remained on a softer trajectory than new order intakes. A number of manufacturers noted that capacity constraints and longer lead-times from suppliers had held back production growth, which resulted in one of the fastest rises in backlogs of work since the survey began in late June 1 The headline Markit Mexico Manufacturing PMI was down from 51.6 in April to 51.0, its lowest level in the current seven-month period of improving business conditions. Manufacturing companies signaled lower output as subdued demand conditions, efficiency losses and the upcoming presidential election affected production. Total factory orders continued to rise, supported by external sales, but the upturn was the slowest in the current seven-month period of uninterrupted growth. Whereas peso depreciation (versus US dollar) translated into greater exports, imported items became costlier to goods producers. As a result, companies cut back on input purchasing as the rate of cost inflation climbed to a 15-month peak.

7 Global Activity Continued... 7 June 1 The Caixin China General Manufacturing PMI was unchanged from the previous month at 51.1 in May. The reading signaled a further modest improvement in the health of the sector. Growth in production and new orders picked up slightly from April, while firms reported a further fall in new export sales. At the same time, companies reduced staffing levels again as part of efforts to cut costs and raise efficiency. This, in part, drove a further increase in outstanding workloads. Inflationary pressures meanwhile intensified, with both input costs and output charges rising at solid rates. Although confidence towards the 12-month outlook for production improved in May, optimism remained subdued by historical standards. June 1 The headline Nikkei Japan Manufacturing PMI fell to 52.8 in May, from 53.8 in April, signaling a slower rate of improvement in the Japanese goods producing sector. Japanese manufacturers pointed to improving demand conditions during May, with new sales to both domestic and overseas clients rising. Although total new order growth eased on the previous month, a stronger increase in new export orders was recorded. That said, the upturn in foreign demand was markedly weaker than the expansions seen at the beginning of the year. Nonetheless, a twentieth successive month of increasing new business inflows prompted firms to boost production line activity in May. Output growth was solid, albeit weaker than the three-month high seen in April. June 1 The final Markit Eurozone Manufacturing PMI posted a 15-month low of 55.5 in May, down from 56.2 in April and unchanged from the earlier flash estimate. The rate of increase has eased in each of month since hitting a record high in December. The PMI has signalled expansion for 59 months in a row and remained above its long-run average (51.9). Rates of expansion in output and new orders both slowed, with increases in employment and backlogs of work also losing momentum. Input cost inflation rose for the first time in four months, whereas the rate of increase in output charges slowed further.

8 Energy 8 May 31 The U.S. Energy Information Administration reported that natural gas spot prices fell at most locations this report week (Wednesday, May 23 to Wednesday, May 30). The Henry Hub spot price fell from $2.86 per million British thermal units (MMBtu) last Wednesday to $2.83/MMBtu. At the New York Mercantile Exchange (Nymex), the June 2018 contract expired Tuesday at $2.875/MMBtu. The July 2018 contract price decreased to $2.885/MMBtu, down 7 Wednesday to Wednesday. June 1 On the NYMEX, the near-month WTI crude oil futures (Cushing, OK WTI Future Contract 1) closed the week at $65.81/bbl on Friday, June 1, down $2.07 (-3.0%) from last week's close of $67.88/bbl. U.S. oil benchmark futures dropped Friday, with the U.S. benchmark marking its lowest finish since April on the back of rising U.S. production and the possibility that OPEC and its allies may decide to boost output. Active U.S. oildrilling rigs increased by 2 for the week, and have now increased in eight of the last nine weeks. Compared to last year, oil rigs have increased by 128. Brent Crude on London's ICE Futures exchange closed the week up at $76.79/bbl (+0.5%). Friday's spread between the two was $10.98/bbl, up over last week's spread of $8.56/bbl and the widest since February, CME Group Inc. Crude Oil Near-Month Futures (WTI & Brent) (U.S. dollars per barrel) Brent WTI

9 U.S. Dollar Federal Reserve Board Weekly Nominal Broad Dollar Index (1997 = 100) Broad Index 30 Day Moving Avg. May 25 According to the most recent release by the Federal Reserve Board, the Nominal Broad Dollar Index closed the week at on Friday, May 25th, of one-tenth of one percent from the previous week's close of With the result, the Index fell for the week for the first time since mid-april. Despite the drop, the Index remained above its 30-day moving average for 26 consecutive days. Over the last six months, the index has advanced 2.0 percent, while it's off nine-tenths of one percent over the last 12 months. The nominal broad dollar index is a weighted average of the foreign exchange values of the U.S. dollar against the currencies of a broad group of major U.S. trading partners Chinese Yuan to US Dollar Chinese Yuan to One U.S. Dollar 30 Day Moving Avg Canadian Dollar to US Dollar Canadian Dollars to One U.S. Dollar 30 Day Moving Avg Federal Reserve Board Federal Reserve Board Japanese Yen to US Dollar 1.30 US Dollar to Euro U.S. Dollars to One Euro 30 Day Moving Avg Japanese Yen to One U.S. Dollar 30 Day Moving Avg Federal Reserve Board Federal Reserve Board

10 , founded in 1933, works globally to aggressively promote aluminum as the most sustainable and recyclable automotive, packaging and construction material in today s market. The Association represents North America and foreign-based primary producers of aluminum, aluminum recyclers, producers of semi-fabricated products and foundries as well as suppliers to the industry or distributors or jobbers. 10 's statistical programs provide industry information on primary aluminum production, new orders of mill products, industry shipments, end use market estimates, inventories, recycling and foreign trade on a monthly, quarterly and annual basis. Special surveys provide data on specific subjects such as primary capacity, flat roll capacity, inventories and castings shipments. Custom reports are available on a for-fee basis. Web briefings are also available upon request. Industry Overview Aluminum Statistical Review (Annual Fact Book) Aluminum Highlights (Weekly) Aluminum Situation (Monthly) Summary of Producer Shipments and Inventories (Monthly) Primary Aluminum Primary Aluminum Production U.S. and Canada (Monthly) Primary Installed Capacity (Annual) Shipments of Primary Aluminum by Form (Quarterly) Mill Products Index of Net New Order Receipts for Aluminum Mill Products (Monthly) Can Stock Shipments (Monthly) Electrical Conductor Shipments (Monthly) Extruded Products Shipments and Press Utilization (Monthly) Flat Roll Capacity (Annual) Foil Shipments (Monthly) Forging and Impacts Shipments (Monthly) Rod, Bar, and Wire Shipments (Monthly) Sheet and Plate Shipments (Monthly) End Use Extrusion Shipments by End Use (Quarterly) Fin Stock Shipments by End Use (Quarterly) Foil Shipments by End Use (Monthly) Sheet and Plate Shipments by End Use (Quarterly) Castings U.S. Foundry Castings Shipments (Quarterly) Canada Foundry Castings Shipments (Annual) Recycling New Can Stock (Class) Scrap Receipts (Monthly) Used Beverage Can Reclamation (Annual) Foreign Trade (based on government customs data) Summary of U.S., Canada and Mexico Imports and Exports (by Commodity), Monthly Foreign Trade Online Database - U.S., Canada and Mexico Exports & Imports of Aluminum (By Commodity, by Country) For a complete list of statistical publications and reports visit our bookstore.