Metals THE STEEL MARKET SEES THE LIGHT VOLUME 213. FERROUS SCRAP PRICES RISE Higher costs for ferrous scrap raw materials boost pricing for steel

Transcription

1 MAY 2016 Metals Inventory & Equipment VOLUME 213 THE STEEL MARKET SEES THE LIGHT FERROUS SCRAP PRICES RISE Higher costs for ferrous scrap raw materials boost pricing for steel STEEL MILLS SLASH CAPACITY Mills also pressure China, the main offender for overcapacity STEEL RECOVERY REMAINS FRAGILE Low-priced, subsidized steel imports remain a threat to the U.S. steel market

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3 Top Trends In April 2016, the average monthly price for shredded steel scrap was up 35% from the start of this year, lending support to steel price hikes. Steel supplies tightened after steel mills slashed production in response to global steel overcapacity and weakened worldwide steel demand. The influx of low-priced, subsidized metals imports remains a serious concern, along with the oil and gas market s negative impact on OCTG.

4 In This Issue 05 Trend Tracker 20 Tin 06 Overview 21 Lead 09 Recent Appraisal Trends 22 Metalworking Equipment 10 Carbon Steel 23 Metals Reference Sheet 15 Aluminum 25 Monitor Information 16 Copper 26 Experience 17 Nickel 27 Apprasial & Valuation Team 18 Stainless Steel 28 About Great American Group 19 Zinc MONITOR METALS GREATAMERICAN.COM MAY GREAT VOLUME 213 LOS ANGELES (HQ) Burbank Blvd. Suite 300 South Woodland Hills, CA T F NEW YORK Graybar Building 420 Lexington Avenue Suite 3001 New York, NY T ATLANTA 1200 Abernathy Rd. Suite 1700 Atlanta, GA T BOSTON 300 First Avenue Suite 201 Needham, MA T F CHICAGO 10 South LaSalle St. Suite 2170 Chicago, IL T F DALLAS 2745 North Dallas Parkway Suite 660 Plano, TX T F CHARLOTTE, NC Brixham Hill Ave. Suite 300 Charlotte, NC T F MILWAUKEE West Park Place Suite 970 Milwaukee, WI T WILTON, CT 73 Old Ridgefi eld Road Suite 6 Wilton, CT T GERMANY Prinzregentenstr 18 Fifth Floor Munchen, Germany 2016 Great American Group, LLC. All Rights Reserved.

5 Trend Tracker Ferrous Metal Non-Ferrous Metal NOLVs Increasing Consistent Sales Trends Decreasing Decreasing Gross Margin Consistent Consistent Inventory Mixed Consistent Pricing Increasing Increasing NOLVS Ferrous: NOLVs increased versus the prior quarter and prior year due to higher pricing and tighter supplies, with the exception of inventory for the oil and gas sector. Non-ferrous: NOLVs remained consistent versus the prior quarter given stable gross margins and slight price increases. SALES TRENDS Ferrous: Sales decreased due to lower pricing compared to last year, which negatively impacted dollar sales. Non-ferrous: Sales decreased as pricing remained below year-ago levels. GROSS MARGIN Ferrous: Gross margins remained consistent versus the prior quarter as price increases were accepted in the market, with higher-cost inventory destocked earlier. INVENTORY Ferrous: Inventory levels were mixed over the past quarter as suppliers of scrap and fl at rolled steel began to restock, while distributors of products for the oil and gas industry continued to destock. Non-ferrous: Inventory levels remained consistent as companies managed inventory levels relative to price fluctuations. PRICING Ferrous: Prices increased over the past quarter due to tighter supplies amid capacity cuts, as well as distributors restocking. Non-ferrous: Prices increased in recent months as supplies of most non-ferrous metals declined due to production cutbacks. Non-ferrous: Gross margins remained consistent, as slight price increases allowed margins to stabilize. 5 MONITOR METALS MAY 2016

6 Overview After last year s downturn in the steel market, steel pricing began to recover in recent months with the support of rising scrap costs and production cuts. However, the influx of low-priced, subsidized steel imports remains a serious concern. Prices for most non-ferrous metals have also stabilized or increased in recent months in the wake of substantial supply cuts, but global demand remains lackluster. Most steel prices, with the exception of oil country tubular goods ( OCTG ), improved in recent months. OCTG pricing remained low due to continued sluggishness in the oil and gas exploration sector, which resulted in numerous closures and idled facilities for U.S. metal recycling yards, fl at rolled steel mills, and OCTG producers, including the Chapter 11 filing of Boomerang Tube, LLC as well as idled facilities at TMK IPSCO and U.S. Steel Corporation ( U.S. Steel ). The U.S. oil and gas rig count remains more than 100% below year-ago levels. However, China s production adjustments did not keep up with declining demand, as the country s heavily subsidized producers continued to churn out large volumes of lowercost steel exports. Upon pressure from the U.S. and other countries, China has recently vowed to reduce its excess capacity nearly 63% by 2019, and has announced stricter lending guidelines for steel companies. Still, market analysts fear the recent rebound in steel prices could spur shuttered Chinese mills to reopen. However, many other steel types enjoyed lifted prices in recent months as supplies tightened and ferrous scrap costs climbed, with average shredded steel scrap prices up 35% in April 2016 since the start of this year. Steel supplies tightened after many U.S. steel producers slashed production in response to global steel overcapacity and weakened worldwide steel demand (both driven by China) last year. U.S. Steel, a major steel producer, recently laid off 25% of its salaried workforce. Domestic production cutbacks refl ect the diffi culty of competing with unfairly traded lower-cost imports. In 2015, 30% of all steel tons sold in the U.S. were imports. China was the largest offender when it came to the market s excess capacity. The country s steel production skyrocketed 540% between 2000 and 2014, while U.S. steel production fell 13%. As China is both the world s largest producer and consumer of steel, its economic slowdown greatly contributed to reduced global steel demand last year. Other major offshore suppliers, including Turkey and South Korea, have also contributed to the fl ood of lower-cost imports entering the U.S. market. The continued swell of U.S. steel imports led capacity utilization at domestic mills to fall as low as 60% in early January, refl ecting an unsustainable level for capital-intensive steel producers. More recently, however, capacity utilization reached 72% for the week ended April 23, 2016, drawing closer to (though still below) the optimal threshold of 80% for profi tability. It remains to be seen whether excess capacity issues recur this year. Base metal prices have largely stabilized or increased in recent months on the heels of reduced production, especially in China. However, pricing is still subject to fluctuate as investors respond to global economic indicators. In addition, market analysts predict global demand for commodities will remain weak this year, given the economic slowdown in emerging markets and tepid growth in developed markets. 6 MONITOR METALS MAY 2016

7 Overview AUTOMOTIVE The automotive industry is a signifi cant consumer of steel and aluminum. U.S. auto sales started 2016 in the slow lane with a decline of 0.4% in January versus the same month in 2015 as harsh winter weather assailed the Northeast. However, the auto market soon began to speed up with increases of 7.0% in February, 3.2% in March, and 3.6% in April, compared to the same months in 2015, aided by new vehicle models, low gas prices, climbing consumer confi dence, and cheap loans. According to Autodata Corp., industry volumes reached 1.5 million vehicles in April 2016, boosting the seasonally adjusted annualized sales rate to 17.4 million vehicles, which puts automakers on track for record annual sales for the second year in a row. Among the Detroit s Big Three automakers, Ford Motor Company and Fiat Chrysler Automobiles both reported their best April sales in a decade or more, with increases of 4.0% and 5.6%, respectively. Meanwhile, General Motors Company s sales fell 3.5%. MANUFACTURING The Institute for Supply Management s purchasing manager s index ( PMI ), an indicator for manufacturing activity, decreased 1.0 percentage point from the seasonally adjusted March 2016 reading of 51.8 to a reading of 50.8 in April However, the April reading remains above the average of 50.4 for the prior 12 months, which refl ected a low of 48.0 and a high of A PMI above 43.2 over a period of time typically denotes an expansion of the overall economy. The overall economy therefore grew for the 83rd consecutive month in April. As a reading above 50 signals expansion in the production economy, the manufacturing sector grew for the second consecutive month. However, the growth rate slowed. Month PMI April March 51.8 February 49.5 January December November 48.4 October 49.4 September 50.0 August 51.0 July 51.9 June 53.1 May 53.1 April ENERGY The Baker Hughes Rig Count tracks active rigs engaged in the exploration of oil and natural gas, and is a leading indicator of demand for metal products used in drilling, completing, producing, and processing hydrocarbons, such as OCTG. Due to the continued oversupply of oil in the global market, crude oil and gas prices have fallen throughout much of 2015 and remained weak in 2016 thus far, reducing exploration. As of April 29, 2016, the U.S. rig count totaled 420 rigs, down by 11 rigs from the prior week and decreasing by 485 rigs from the same week in Although the rig count continues to decline, the rate of decline compared to the prior year has slowed in recent months. However, analysts expect energy firms to shed more rigs in 2016, with major U.S. shale oil companies slashing spending plans after crude prices hit 12-year lows. A U.S. rig count below 400 units would set a new post-world War II record low, according to Natural Gas Intel. 7 MONITOR METALS MAY 2016

8 Overview The Canadian rig count totaled 37 rigs as of April 29, 2016, The international rig count totaled 985 rigs in March 2016, down by three rigs since the prior week and decreasing by 42 down by 33 rigs from the prior month and decreasing by rigs from the same week in Baker Hughes forecasts 266 rigs from March Baker Hughes projects a steady the North American rig count will drop 30% in the second decline in the international rig count through the end of 2016, quarter of 2016 compared to the average count for the first given the limited number of new projects in the pipeline. quarter, although the U.S. rig count is expected to stabilize in the second half of Date U.S. Rig Count Change From Prior Year Canadian Rig Count Change From Prior Year April 29, April (485) 37 (42) (578) 49 (51) March (703) 129 (171) February (796) 206 (154) January 29, (924) 231 (163) December 31, (1,142) 83 (173) November (1,173) 184 (254) October (1,154) 191 (238) September (1,093) 176 (253) August (1,037) 196 (207) July (1,015) 215 (177) June (950) 116 (98) May (949) 79 (84) 1,028 (790) 100 (135) April 2, MONITOR METALS MAY 2016

9 Recent Appraisal Trends Appraisals valuing metals inventory typically rely on market prices, which are affected by input costs, supply levels, and demand from metal-consuming industries such as the automotive, industrial, and oil and gas drilling sectors. Based on industry trends, NOLVs for ferrous metals over the past few months have increased versus the prior quarter and the prior year, as capacity cuts and destocking at distributors have resulted in tighter supplies and higher market pricing so far this year, with the exception of inventory for the oil and gas sector. NOLVs for non-ferrous metals have remained relatively consistent, given stable gross margins and slight improvements in non-ferrous metal pricing. Prices for ferrous metals generally increased over the past quarter, as capacity cuts in the U.S. and China resulted in lower supplies, and distributors who destocked throughout 2015 began to reenter the market. However, pricing for ferrous products intended for the oil and gas industry remains depressed. Prices for non-ferrous metals increased slightly in recent months as supplies of most non-ferrous metals declined due to production cutbacks, particularly reduced aluminum production in China. Sales of ferrous inventory decreased, as pricing levels continue to negatively impact dollar sales as compared to a year ago; however, volume demand has seen an uptick in recent months, with the exception of demand from the oil and gas market. Sales of non-ferrous inventory also decreased, as pricing remained depressed compared to year-ago levels. Gross margins for ferrous metals remained relatively consistent versus the prior quarter, as price increases are being accepted in the market, with higher-cost inventory destocked earlier. Gross margins for non-ferrous metals were also consistent over the past quarter, as recent price increases have allowed margins to stabilize. Inventory levels for ferrous metals were mixed. Suppliers of ferrous scrap and distributors of fl at rolled steel products began to restock amid rising prices as they sold through higher-cost material. However, distributors of steel products for the oil and gas industry continued to destock, given the lack of demand. Inventory levels for non-ferrous metals remained consistent, as companies continued to manage inventory levels relative to pricing fluctuations. However, as prices have begun to firm, inventory levels could potentially increase in future months. For commodity-based appraisals, the gross recovery rates are based on discounts from market pricing. Specialized grades, sizes, and forms of metals with limited distribution channels typically require increased discounts off market price, or may be sold at scrap market value. GA recognizes recovery values are unique for each company based on costing, gross margin trends, inventory mix and levels, and other company-specifi c factors. In addition, as market prices are volatile, a change in market price trends would have an impact on recovery values. 9 MONITOR METALS MAY 2016

10 Carbon Steel SCRAP Shredded carbon steel scrap prices averaged $262 per gross ton in April 2016, up from $218 per gross ton the prior month and reaching parity with the April 2015 average of $262. After falling throughout most of the second half of 2015 due to lower mill demand and export prices, scrap steel prices have climbed in 2016 thus far. The recent turnaround has been driven by improved mill demand amid first-quarter restocking, as well as rising prices for ore, export scrap, and downstream steel products. Export prices for shredded steel scrap jumped by nearly $70 per metric ton between early April and early May given a rally in the global scrap market. The rally was particularly strong in Turkish and Asian markets, driven by price hikes on Chinese steel and raw materials. According to Steel Business Briefing ( SBB ), Northeastern U.S. mills and East Coast bulk exporters raised their offer prices for scrap in early May during the buy-week, given the firm export market and tight supplies. In addition, scrap buyers sought to secure material in advance of more signifi cant price increases expected during the week. Mills are conceding that we are going to have an up market, said a dealer source per SBB. The closer to the coast you are, the higher the prices will go [in May] relative to April. 1 Carbon Shredded Steel Scrap - North America Domestic Delivered Mill Monthly Average Price Per Gross Ton - April 2015 to April MONITOR METALS MAY 2016

11 Carbon Steel UTILIZATION RATES As ferrous scrap is a key raw material for raw steel production, capability utilization rates for steel mills are an indicator of ferrous scrap demand. The American Iron and Steel Institute ( AISI ) reported that domestic raw steel production totaled 1,684,000 net tons in the week ended April 23, 2016, declining 0.5% from the previous week, but increasing 2.1% from the same week in Capability utilization reached 72.0%, down from 72.4% the prior week, but up from 69.8% the same week the previous year. Adjusted year-to-date production through April 23, 2016 totaled 28,213,000 net tons at a capability utilization rate of 70.6%, down 2.2% from 28,843,000 net tons in the same period last year, when the capability utilization rate was 72.4%. Week Ended Production Change Vs. Prior Year January 3, % January (7.6%) February (0.4%) March % April 23, % Year-to-Date 28.2 (2.2%) 11 MONITOR METALS MAY 2016

12 Carbon Steel CARBON STEEL SHEET COIL Hot rolled coil steel prices averaged $497 per net ton in April 2016, up from $428 the prior month and remaining above the April 2015 average of $450. Cold rolled coil steel prices averaged $664 per net ton in April 2016, up from $590 the prior month and above the April 2015 average of $584. After falling throughout the last half of 2015 due to an oversupply and weak demand, fl at rolled steel prices increased throughout 2016 thus far as buyers restocked inventories while supplies tightened and lead times extended. In addition, elevated pricing has been aided by higher costs for steel scrap raw materials. In early May, the Platts daily price assessments for hot and cold rolled coil averaged $540 and $710 per net ton, respectively. However, SBB reported that in early May, certain U.S. steelmakers tested the waters by raising hot rolled coil prices above the $600 mark in one fell swoop, surprising market participants that expected the market to reach this level with two rounds of price increases. Some buyers are rushing to purchase before further price increases can be implemented. Service centers banking on a continued environment of price increases hope to benefi t from higher resale values. 2 Hot Rolled Coil and Cold Rolled Coil - North America Domestic FOB U.S. Midwest Mill Monthly Average Price Per Net Ton - April 2015 to April MONITOR METALS MAY 2016

13 Carbon Steel PLATE A36 steel plate prices averaged $574 per net ton in April 2016, increasing from $495 the prior month but remaining below the April 2015 average of $610. After declining throughout the second half of 2015 due to a fl ood of lowerpriced imports, plate prices increased in 2016 thus far as steel mills Nucor Corporation and SSAB announced six different rounds of price hikes since December. The price increases gained traction amid higher scrap costs and low service center plate inventories, and mills became less fl exible in allowing lower-priced deals to close. In addition, lead times are increasing, with deliveries as late as mid-june. However, distributor resale prices are lagging behind mill pricing due to the rapid succession of mill price hikes. While mills pushed plate prices averaging $670 per net ton on a delivered Midwest basis in the last week of April, some distributors were offering plate at only $600 per net ton, according to SBB. Still, certain market participants believe that distributors will soon catch up with their pricing. Less competition with lower-priced imports is also aiding the strength in the domestic plate market. Due to exhaustive antidumping petitions filed by U.S. plate mills against 12 countries, the plate imports hitting the U.S. market are not particularly appealing, given the fairly negligible discount compared to domestic material. Certain market sources expect plate imports to diminish in June. According to SBB, domestic plate prices averaged $640 per net ton, ex-works, in early May Steel Plate (A36) - North America Domestic FOB U.S. Midwest Mill Monthly Average Price Per Net Ton - April 2015 to April MONITOR METALS MAY 2016

14 Carbon Steel LONG PRODUCTS Prices for rebar, U.S. domestic ex-works Southeast, averaged $505 per net ton in April 2016, up from $465 the prior month but remaining below the April 2015 average of $573. Rebar prices have generally fallen over the last year due to a continued influx of lower-priced imports, but increased in April 2016 as mini-mills announced a price hike due to higher import prices, improved demand, and increased scrap costs. The U.S. Census Bureau reported a 36% increase in U.S. rebar imports in March Turkey was the largest supplier, accounting for approximately 90% of total U.S. rebar imports, which refl ects a jump from 66% in February. Turkish rebar offers have spiked by more than $70 per net ton in April to reach over $453 per ton in the last week of April. However, Turkey remains the price leader in the U.S. Gulf region, followed by Japan, which is unlikely to undercut Turkey s pricing. Three U.S. steel mills announced another price increase on rebar in early May. Nucor Corporation boosted rebar pricing by $35 per net ton, while Steel Dynamics, Inc. and Commercial Metals, Co. raised prices by $45. 4 Rebar - U.S. Domestic EXW Southeast Monthly Average Price Per Net Ton - April 2015 to April MONITOR METALS MAY 2016

15 Aluminum Prices for P1020 primary aluminum ingot averaged $0.79 per pound in April 2016, inching up from $0.77 the prior month but remaining below the April 2015 average of $0.99. Aluminum prices have stabilized in recent months, with only minor fluctuations, although pricing remains nearly 20% below year-ago levels. The freefall in aluminum pricing seen last year has been curbed by production cuts, particularly in China, which accounts for more than half of the global aluminum supply. Last year, China pumped historically high levels of low-priced aluminum into the global market while its own consumption weakened. As more than 70% of China s aluminum capacity is currently unprofi table, given the drop in the country s aluminum pricing to the lowest level since 1996, 14 major Chinese smelters met in December 2015 and agreed to scale back production. The idled capacity is unlikely to restart anytime soon, given the high costs of restarting potlines. Stabilizing aluminum pricing is also aided by conditions outside of China. Excluding China, the aluminum market is in a defi cit, particularly in the U.S., where more and more producers are cutting capacity. In addition, aluminum stocks continue to decline in LME warehouses. 5 LME Aluminum Warehouse Stocks Monthly Average Metric Tons - April 2015 to April P1020 Primary Aluminum Ingot - Delivered U.S. Midwest Monthly Average Price Per Pound - April 2015 to April MONITOR METALS MAY 2016

16 Copper The London Metal Exchange ( LME ) market price for copper averaged $2.20 per pound in April 2016, declining from $2.24 the prior month and remaining below the April 2015 average of $2.73. Copper prices had fallen sharply in 2015 due to economic weakness in China, the world s largest consumer of copper, and market participants are therefore closely watching China s economic indicators with bated breath. 7 LME Copper Warehouse Stocks Monthly Average Metric Tons - April 2015 to April 2016 Copper prices recovered slightly in February and March 2016 on the back of improving Chinese economic data. However, copper prices slid downward in April as optimism began to fade after disappointing results for China s April manufacturing PMI, which refl ected softness in China s factory activity. In addition, copper inventories remain plentiful in the short term, as production cutbacks implemented by copper smelters and producers have yet to affect the market. 8 Copper LME Monthly Average Price Per Pound - April 2015 to April 2016 Still, LME warehouse stocks fell for the last several months, and market supplies are expected to dip 1.5% this year due to production cuts, which could result in a small defi cit. 16 MONITOR METALS MAY 2016

17 Nickel Nickel prices on the LME averaged $4.02 per pound in April 2016, up from $3.95 the prior month but remaining below the April 2015 average of $5.80. Nickel prices on the LME fell in January and February 2016 due to lower demand from China, but inched up in March and April amid expectations of a defi cit this year. As nickel prices plummeted nearly 40% in 2015, many miners have cut back production in an effort to stabilize pricing. However, the recent price recovery may be shortlived, given healthy stockpiles of nickel material. Nickel remains the worst-performing metal among the non-ferrous metals traded on the LME, and an estimated 80% of nickel producers are operating at a loss at current price levels. Although China has greatly reduced its finished nickel production, a portion of the lost production will be replaced by Chinese-commissions output from Indonesia. In addition, growth in nickel demand is expected to be sluggish this year. Industry analysts foresee a relatively balanced market this year before an oversupply creeps into the market in Nickel prices are forecast to average $3.99 per pound this year. 9 Nickel LME Monthly Average Price Per Pound - April 2015 to April MONITOR METALS MAY 2016

18 Stainless Steel In April 2016, prices for grades 301 (7%), 304 (8%), and 316 stainless steel averaged $0.90, $0.95, and $1.22 per pound, respectively, remaining relatively consistent with $0.90, $0.95, and $1.21, respectively, the prior month. However, stainless steel prices remained below April 2015 levels. Stainless steel prices have stabilized in recent months in line with surcharges, given less volatility in nickel pricing. In addition, rising costs for steel scrap supported price increases for stainless steel. AK Steel boosted base prices for all of its stainless steel products, effective for shipments starting May 1, The price hike for commodity and specialty stainless steel sheet, strip, pipe, and tube products was achieved via a reduction in the functional discount, while the price hike for remaining stainless steel products was achieved by an increase in base prices of $40 per ton. Global production of stainless steel declined 0.3% in 2015, marking the first drop in stainless melt shop output since 2009, according to the International Stainless Steel Forum. Most regions experienced declines in output. China, which remained the world s largest producer of stainless steel, saw its output slip 0.6% in 2015 after a jump of 14.3% in Excluding China, Asia was the only region where production increased, with output up 1.4%. In industry news, Allegheny Technologies Inc. ( ATI ) recently announced the elimination of more than 250 positions, or nearly one-third of non-union employees, in its Flat Rolled Products division as a part of actions taken to restructure operations. ATI has already idled its fl at rolled mill in Midland, Pennsylvania and its grain-oriented electrical sheet mill in Bagdad, Pennsylvania in recent months. 10 Stainless Steel Flat Rolled Coil Monthly Average Price Per Pound - April 2015 to April MONITOR METALS MAY 2016

19 Zinc The LME market price for zinc averaged $0.84 per pound in April 2016, increasing from $0.82 the prior month but remaining below the April 2015 average of $1.00. While zinc prices declined through much of 2015 due to global economic concerns and a small surplus, prices have been on the rise in recent months as demand recovers. Global zinc mine output is expected to decline 1.4% this year. While Chinese output is anticipated to grow 4%, U.S. output will fall 24%. According to the International Lead and Zinc Study Group ( ILZSG ), global demand for refined zinc metal is slated to increase 3.5% to 15.8 million tons in 2016, exceeding supply by 387,904 tons. Global demand growth will be driven by greater infrastructure investments in China, whose overall zinc demand is pegged to rise 4.5%. 11 Zinc LME Monthly Average Price Per Pound - April 2015 to April MONITOR METALS MAY 2016

20 Tin The market price for tin on the LME averaged $7.74 per pound in April 2016, increasing from $7.71 the prior month and rising above the April 2015 average of $7.25. Tin prices have received a boost this year, aided by a slight defi cit. According to the World Bureau of Metal Statistics, the global tin market recorded a defi cit of 2,100 tons in the first two months of Global tin demand increased 2.9% in January and February 2016 versus 2015, fueled by a large uptick in Chinese apparent demand. The current largest end-market for tin is the lead-free soldering market, which has recently experienced dips in tin use. However, analysts anticipate new uses in the energy industry could further buoy tin pricing. Such uses may include applications in lithium-ion batteries, solar cells, fuel cells, and fuel catalysts. 12 Tin LME Monthly Average Price Per Pound - April 2015 to April MONITOR METALS MAY 2016

21 Lead The LME market price for lead averaged $0.78 per pound in April 2016, decreasing from $0.82 the prior month and remaining below the April 2015 average of $0.91. Prices have fluctuated in recent months, as investor whims are often tied to shifts in economic indicators. Lead prices dipped in April in the midst of lackluster demand from battery makers on the spot market and slower U.S. manufacturing growth as indicated by the PMI. In addition, the ILZSG recently forecasted a surplus of 83,752 tons for refined lead metal in 2016, as lead metal supplies are slated to climb 2.3% amid increased output from China and additional capacity from Korea Zinc Co. Ltd. s new lead plant. Global demand for refined lead is anticipated to rise 2.0% this year, with higher usage by China s automotive and industrial battery sectors partially offset by slowing sales growth in the e-bike market. 13 Lead LME Monthly Average Price Per Pound - April 2015 to April MONITOR METALS MAY 2016

22 Metalworking Equipment The market for metalworking equipment has begun to rebound from declines experienced in the latter half of 2015 and early months of Continued slow growth in the aerospace and automotive industries has contributed to this rebound. Pricing in commodities markets for metals experienced improvement over the last several months, which bodes well for the future of the metalworking equipment market. However, the continued decline in the oil and gas industry has applied downward pressure on the metalworking equipment market and limited the upturn in pricing for equipment in the secondary marketplace. Recently, the U.S. Manufacturing Technology Orders released its report on the overall status of the industry. For March 2016, total orders were up almost 37% over the prior month. When comparing numbers on a month-to-month basis, this would appear to suggest an upturn in the industry outlook; however, the report notes that manufacturing technology firms typically end their fiscal year on March 31, which drives activity and sales in the early part of the calendar year. Industry experts suggest that even with the sharp gains in March, the overall outlook for the industry remains fl at. In May 2016, the Association for Manufacturing Technology suggested that these persistent economic challenges and softer market could last into the fourth quarter of this year. In U.S. markets, movement of used equipment has been motivated by those sectors that continue to offer the best opportunities for growth. This includes the aerospace, automotive, and medical technology sectors. Sentiment among executives and equipment purchasers in these sectors remains optimistic with regards to future spending on metalworking equipment. Additionally, returning demand from construction markets appears to be supporting the recovery in metalworking, specifi cally as it pertains to demand for foundry equipment. As construction markets picked up in 2015 and 2016, the demand for iron and steel castings used in commercial and civil construction has increased. Foundry operations have begun to restart and are working to increase capacity in order to meet demand. Recent trends in other sectors of the metalworking industry suggest that this may lead to increased demand for used equipment in the secondary marketplace. Machine tools, such as CNC fabrication and cutting equipment, remain one of the stronger areas of the secondary marketplace for metalworking equipment. From 2011 to 2013, the market for machine tools experienced a boom driven by increased demand and long lead times from equipment manufacturers. This led to rising prices for used metalworking equipment in the secondary marketplace. More recently, as end-users and dealers have pulled back from purchasing either new or used equipment, those prices have declined to what would be considered average, but stable, when compared to the last several years. Larger-capacity machines continue to be the most desirable in the secondary marketplace, while smaller machines are harder to sell. This is likely caused by equipment purchasers desire for increased effi ciency and productivity to meet their customers rising demand for quick turnarounds on orders. Looking ahead, key factors at play in the market for metalworking machinery and equipment will continue to include commodity prices for metals, as well as the overall status of the oil and gas industry. Continued decline in the oil and gas industry, coupled with the strength of the U.S. dollar, is expected to continue to drive down values for metalworking machinery in the secondary marketplace. It is recommended that lenders update their appraisals of metalworking operations to refl ect current market conditions if they have not done so in the last 24 months. 22 MONITOR METALS MAY 2016

23 Metals Reference Sheet CARBON STEEL SCRAP VALUES CHICAGO MARKET Year Ago February 2016 March 2016 April 2016 Auto Shred $235/GT $190/GT $207/GT $250/GT HMS (Heavy Melt Steel) $225/GT $150/GT $180/GT $221/GT Bushing $240/GT $180/GT $193/GT $235/GT CARBON STEEL VALUES IN COMMODITY FORMS Carbon Flat Rolled Sheet Coil (Base Price) Year Ago February 2016 March 2016 April 2016 Hot Bands $444/NT $400/NT $415/NT $488/NT Cold Rolled $566/NT $546/NT $584/NT $649/NT Hot-Dipped Coated Galvanized $638/NT $616/NT $654/NT $719/NT Carbon Steel Plates (Base Price) Year Ago February 2016 March 2016 April 2016 Plate Coils and Strip Mill Coils $470 - $500/NT $415 - $430/NT $428 - $443/NT $500 - $515/NT Discrete Plates* Carbon Steel $607/NT $470/NT $489/NT $552/NT Alloys Plates $986/NT $835/NT $854/NT $917/NT *Depending on thickness limits and subject to grade extras up to $600/NT. Hot Rolled Merchant Bar (MBQ) Shapes (Net of Discounts and Rebates) Year Ago February 2016 Delivery March 2016 Delivery April 2016 Delivery 1/2 X 4 Flats* $727 Avg/NT $577 Avg/NT $577 Avg/NT $578 Avg/NT 2 X 2 X 1/4 Angles* $723 Avg/NT $573 Avg/NT $573 Avg/NT $574 Avg/NT Rebar Coils, Grade 60: #3 to #5 Sizes $600 Avg/NT $476 Avg/NT $470 Avg/NT $513 Avg/NT Merchant Bar (FOB Midwest Mill) $683 - $703/NT $558 - $573/NT $558 - $573/NT $588 - $603/NT *Variances include East to West Coast markets and variances in rebates. SBQ Bars (Including Surcharges and Net of Rebates) Year Ago February 2016 Delivery March 2016 Delivery April 2016 Delivery Hot Rolled " Diameter $40.95/CWT ($819/NT) $31.22/CWT ($624/NT) $31.00/CWT ($620/NT) $31.79/CWT ($635/NT) Hot Rolled " Diameter $47.95/CWT ($959/NT) $38.22/CWT ($764/NT) $38.00/CWT ($760/NT) $38.00/CWT ($760/NT) Cold Finished C1018 1" Diameter $51.45/CWT ($1,029/NT) $45.50/CWT ($910/NT) $45.50/CWT ($910/NT) $46.81/CWT ($936/NT) 23 MONITOR METALS MAY 2016

24 Metals Reference Sheet CARBON STEEL VALUES IN COMMODITY FORMS (CONTINUED) OCTG and Line Pipe Sampling Year Ago February 2016 Delivery March 2016 Delivery April 2016 Delivery J55 ERW 4 1/2" to 8 5/8" $990 - $1,050/NT $750 - $780/NT $760 - $800/NT $760 - $800/NT Line Pipe ERW 4" Black $800 - $820/NT $800 - $820/NT $820 - $860/NT $860 - $880/NT PRIMARY MAJOR NON-FERROUS METALS Aluminum Year Ago February 2016 March 2016 April 2016 Aluminum (LME Values) $0.8242/LB $0.6985/LB $0.6943/LB $0.7096/LB Aluminum N.A. (High Grade P1020) $0.9917/LB $0.7869/LB $0.7746/LB $0.7906/LB MWTP (Midwest Premium) $0.1635/LB $0.0904/LB $0.0802/LB $0.0813/LB Aluminum Alloy A380.1 (LME Values) $1.0050/LB $0.8625/LB $0.8688/LB $0.8675/LB Copper and Nickel Year Ago February 2016 March 2016 April 2016 Copper High Grade A (LME Values) $2.7345/LB $2.0845/LB $2.2442/LB $2.2004/LB Nickel (LME Values) $5.7982/LB $3.7691/LB $3.9481/LB $4.0155/LB *Depending on thickness limits and subject to grade extras up to $600/NT. STAINLESS STEEL AND SURCHARGES Stainless Steel Flat Rolled Sheet Coil (With Current Average Distributor Discount) x 48/60 Wide x Coil Year Ago February 2016 Delivery March 2016 Delivery April 2016 Delivery T304* $1.2293/LB $0.9476/LB $0.9354/LB $0.9474/LB T316/316L* $1.6181/LB $1.2129/LB $1.1986/LB $1.2170/LB *The above changes in product prices are driven by changes in monthly elemental metallic surcharges. These are most heavily impacted by changes in nickel values but result from the combined impact of nickel, chrome, molybdenum, titanium, ferrous scraps, and energy (natural gas). Surcharges are established from the monthly averages of the elements two months prior to the affected month. Surcharges (From North American Stainless) Year Ago February 2016 March 2016 April 2016 T304/304L $0.6133/LB $0.3316/LB $0.3194/LB $0.3314/LB T316/316L $0.8201/LB $0.4149/LB $0.4006/LB $0.4190/LB 24 MONITOR METALS MAY 2016

25 Monitor Information The Metals Monitor provides market value trends in both ferrous and non-ferrous metals. The commodity nature of steel scrap, aluminum ingot, copper cathode, and nickel often results in volatile market values. Our quarterly Metals Monitor refl ects pricing and market trends over the prior quarter, as well as forward-looking projections, in order to refl ect signifi cant developments in the metals markets. The Metals Monitor includes a sampling covering most metals projects. GA s metals expertise is not confined to use on pure metals projects, but is always utilized in assuring the accuracy and insight for all manufacturing projects where metals are the primary or signifi cant raw materials, regardless of the sector of the finished products. This assures that all appraisals from GA refl ect the full scope of our experience and insight. GA internally tracks additional specialty and tool steels, all raw materials for steel, specialty steel, and primary aluminum production and manufacturing, but we are mindful to adhere to your request for a simple reference document. Should you need any further information or wish to discuss recovery ranges for a particular segment, please feel free to contact your GA Business Development Offi cer. GA s Metals Monitor provides market value and industry trend information for a variety of metals products. The information contained herein is based on a composite of GA s industry expertise, contact with industry personnel, industry publications, liquidation and appraisal experience, and data compiled from a variety of well-respected sources believed to be reliable. GA does not make any representation or warranty, expressed or implied, as to the accuracy or completeness of the information contained in this issue. Neither GA nor any of its representatives shall be liable for use of any of the information in this issue or any errors therein or omissions therefrom. 25 MONITOR METALS MAY 2016

26 Experience GA s extensive record of metals inventory valuations features appraisals for companies throughout the entire metal supply chain, including foreign and domestic metal- and steel-producing mills; metal converters that produce tubing and pipe, as well as expanded, grating, and perforated metal types; metal service centers/processors and distributors; structural and custom fabricators and stampers; manufacturers that utilize metals as raw materials; and scrap yards, recyclers, dealers, and brokers. Over the past three months, GA performed appraisals of companies with annual revenues ranging from $43.7 million to $4.8 billion, including the following sampling: Multiple steel processors and service centers; Several manufacturers of aluminum extrusions; Several manufacturers of OCTG products; A manufacturer of steel tubes, pipes, wire, and frames; A processor and distributor of structural steel products; A leading global processor of scrap metal; A broker and recycler of scrap metal; A contract processor and distributor of fl at rolled steel; A manufacturer of cable and wire products; A master distributor of semi-finished aluminum; A producer of ductile and gray iron castings; and A manufacturer of brass and bronze ingots. GA s extensive appraisal experience also includes valuations of the following major businesses in the metals industry: Globally recognized vertically integrated steel tube manufacturers; A vertically integrated aluminum producer including both the upstream and downstream sides of the industry, with over $1 billion in sales annually and over $130 million in inventory; One of the U.S. s largest scrap recycling processors, with nearly $550 million in sales annually; and Well-known service centers across the nation, including a multi-division full line steel service center consisting of over 50 locations across the U.S., with $2.6 billion in annual sales and over $500 million in inventory. GA additionally maintains appraisal experience involving precious metals and specialty metals, allowing GA to provide experience-based valuations across the entire metals industry. The metal products that GA has appraised have maintained applications throughout a wide variety of industries, including the automotive, construction, aerospace, industrial machinery and equipment, and appliance and electrical equipment markets. Moreover, GA has liquidated a number of companies with metal products, including Advanced Composites, Aluminum Skylight & Specialty Corporation, Anello Corporation, Apex Pattern, Balox Fabricators, BJS Industries, Buckner Foundry, Crown City Plating, GE Roto Flow, Laird Technology, Maddox Metal Works, Miller Pacifi c Steel, R.D. Black Sheet Metal, Valley Brass Foundry, and Southline Steel. GA has also been involved in liquidations of metalworking equipment for companies such as Adams Campbell Company, CAMtech Precision Manufacturing, Inc., Gregg Industries, Inc., International Piping Systems, Heat Transfer Products, PMC Machining and Manufacturing, Sherrill Manufacturing, Trans-Matic Manufacturing, Veristeel, Inc., and Weiland Steel, Inc. In addition to our vast appraisal and liquidation experience, GA maintains a staff of experienced metals experts with personal contacts within the metals industry that we utilize for insight and perspective on recovery values. 26 MONITOR METALS MAY 2016

27 Appraisal & Valuation Team BUSINESS DEVELOPMENT Mike Marchlik National Sales & Marketing Director (818) Ryan Mulcunry Executive Vice President Northeast Region, Canada & Europe (857) David Seiden Executive Vice President Southeast Region (404) Bill Soncini Senior Vice President Midwest Region (773) Daniel J. Williams Managing Director New York Region (908) Drew Jakubek Managing Director Southwest Region (214) Jeffrey W. Christner Relationship Manager WI, PA (773) Bryan Fischer Relationship Manager CO, KS, MO, UT (857) bfi Jennie Kim Vice President Western Region (818) OPERATIONS Michael Petruski Executive VP, General Manager (818) Greg Trilevsky Senior Appraiser (Metals) (909) Alex Tereszcuk Senior Appraiser (Metals) (336) Dan Tracy Senior Appraiser (Metals) (412) John Little Senior Appraiser (Scrap Recycling) (864) Kristi Faherty Managing Director (781) Bill O Brien Managing Director (781) bobrien@greatamerican.com Ryan Lutz Senior Project Manager (781) rlutz@greatamerican.com ASSET DISPOSITION TEAM Scott Carpenter President, GA Retail Solutions (818) scarpenter@greatamerican.com Adam Alexander President, GA Global Partners (818) aalexander@greatamerican.com 27 MONITOR METALS MAY 2016

28 About Great American Group Great American Group is a leading provider of asset disposition solutions and valuation and appraisal services to a wide range of retail, wholesale, and industrial clients, as well as lenders, capital providers, private equity investors, and professional services fi rms. In addition to the Metals Monitor, GA also provides clients with industry expertise in the form of monitors for the chemicals and plastics, technology, food, and building products sectors, among many others. For more information, please visit www. greatamerican.com. Great American Group, LLC is a wholly owned subsidiary of B. Riley Financial, Inc. (NASDAQ: RILY), a diversifi ed provider of collaborative financial and business advisory services through several subsidiaries, including: B. Riley & Co. LLC, a leading investment bank and a FINRA & SIPC member, which provides corporate finance, research, and sales & trading to corporate, institutional and high net worth individual clients; Great American Group, LLC; B. Riley Capital Management, LLC, an SEC registered Investment Advisor, which includes B. Riley Asset Management, a provider of investment products to institutional and high net worth investors, and B. Riley Wealth Management (formally MK Capital Advisors), a multi-family offi ce practice and wealth management fi rm focused on the needs of ultrahigh net worth individuals and families; and Great American Capital Partners, a provider of senior secured loans and second lien secured loan facilities to middle market public and private U.S. companies. B. Riley Financial, Inc. is headquartered in Los Angeles with offi ces in major financial markets throughout the United States and Europe. For more information on B. Riley Financial, Inc., please visit For B. Riley s research access, please contact a B. Riley representative at MONITOR METALS GREATAMERICAN.COM MAY GREAT VOLUME 213 LOS ANGELES (HQ) Burbank Blvd. Suite 300 South Woodland Hills, CA T F NEW YORK Graybar Building 420 Lexington Avenue Suite 3001 New York, NY T ATLANTA 1200 Abernathy Rd. Suite 1700 Atlanta, GA T BOSTON 300 First Avenue Suite 201 Needham, MA T F CHICAGO 10 South LaSalle St. Suite 2170 Chicago, IL T F DALLAS 2745 North Dallas Parkway Suite 660 Plano, TX T F CHARLOTTE, NC Brixham Hill Ave. Suite 300 Charlotte, NC T F MILWAUKEE West Park Place Suite 970 Milwaukee, WI T WILTON, CT 73 Old Ridgefi eld Road Suite 6 Wilton, CT T GERMANY Prinzregentenstr 18 Fifth Floor Munchen, Germany 2016 Great American Group, LLC. All Rights Reserved. 28 MONITOR METALS MAY 2016