Metals Monitor. August 2015 Metals Monitor

Transcription

1 1 Metals Monitor 1

2 Trend 1 Tracker Ferrous Metal Non-Ferrous Metal NOLVs Sales Trends Gross Margin Inventory Pricing Ferrous: NOLVs decreased versus the prior year, as prices remain well below last year s levels due to sluggish demand and cheap imports. Ferrous: Gross margins decreased versus the prior year due to the decline in pricing, but improved over the past quarter as many companies destocked higher-cost inventories. Non-ferrous: NOLVs decreased versus the prior year due to downward pressure on metals traded on the London Metal Exchange Non-ferrous: Gross margins decreased, as prices were significantly impacted by negative Chinese economic data. ( LME ) amid global economic concerns and aluminum overproduction. Ferrous: Inventory levels decreased over the past quarter due to destocking, leaner Ferrous: Sales were mixed due to higher sales inventories, and lower imports. to the automotive and construction industries, as well as lower sales to service center customers and the oil and gas industry. Non-ferrous: Inventory levels remained consistent as companies managed inventory levels relative to price fluctuations. Non-ferrous: Sales increased due to demand growth from the automotive, construction, and aerospace sectors. Ferrous: Prices were mixed in recent months given stabilizing scrap and flat rolled steel prices, as well as lower tubing, rebar, and plate prices. Non-ferrous: Prices decreased due to China s pullback in demand for all non-ferrous metals and a summer slowdown in demand. 1

3 Overview 2 The metals market softened in recent months. Steel prices remained lackluster, stabilizing or declining slightly amid a summer slowdown in demand and competition from lower-cost imports for certain steel types. While prices for many non-ferrous metals followed relatively normal trends from January to April, with a 2015 high in early May, prices soon began to fall in response to concerns over the slowing Chinese economy, the continuation of the Greek debt crisis, and the strengthening of the U.S. dollar. Flat rolled steel prices weakened in most global markets in June and July, with prices for Chinese hot rolled coil reaching new lows and prices for European material languishing during the seasonal deceleration in demand. In the U.S. market, however, flat rolled steel prices remained relatively stable in recent months, but may fall in the wake of July s lower ferrous scrap prices and declining iron ore prices. Steel plate and rebar prices dropped in recent months due to the continued presence of competitive imports, despite lower import levels versus the prior quarter. Domestic prices suffered from higher-than-expected levels of cut-to-length plate as well as cheap rebar imports from Turkey. Prices for many base metals thus far in 2015, including lead, zinc, copper, and nickel, peaked in early May due to the positive outlook at the time. However, prices for non-ferrous metals soon began to deteriorate due to global economic concerns. China s economy has been one of the most influential factors impacting base metal pricing, as China is historically the world s largest consumer of base metals at 40% of global demand. Investors therefore exercised caution following the steep drop in the equity market and an estimated lower GDP increase for China, and were further troubled by China s devaluation of its currency in August, as these factors may reduce China s base metal usage. Chinese base metal consumption is slowing at the same time its supplies are rising. Morgan Stanley forecasts that after stagnant mine production in 2014, Chinese mine output will increase 5% this year and climb through In recent months, the Greek debt crisis also spooked investors, who feared that Greece would exit the Eurozone in the absence of a bailout, and that related economic problems in other European countries could impact future demand for base metals. However, Greece reached a bailout deal in August, and the impact remains to be seen. Finally, the U.S. dollar has recently been on the rise, strengthening against nearly all other global currencies. The strong U.S. dollar has dampened export demand, given the relative costliness of U.S. base metal exports compared to exports from countries with a weaker currency. 2

4 Overview 3 The automotive industry is a significant consumer of steel and aluminum. Zacks Investment Research reported U.S. light vehicle sales increased 4.4% for the first half of 2015 versus 2014, marking the highest first-half sales results since Auto demand has been buoyed by easier credit standards, improving employment rates, low gas prices, and new vehicle models. Automaker profitability has benefited from plant closures during the recession, which brought output closer to demand and resulted in less discounting. A PMI above 43.1 over a period of time typically denotes an expansion of the overall economy. The overall economy therefore grew for the 74 th consecutive month. As a reading above 50 signals expansion in the production economy, the manufacturing sector expanded for the 31 st straight month. The fabricated metals products, electrical equipment, appliances and components, and transportation equipment sectors were among the manufacturing industries reporting growth in July, while the primary metals and machinery industries were among those reporting contraction. According to The New York Times, U.S. auto sales increased 5.3% in July 2015 versus the prior year, totaling more than 1.5 million vehicles and exceeding expectations. In addition, the seasonally adjusted annual rate climbed 3.2% to 17.6 million units, the second highest tally in a decade, versus 16.5 million units a year ago. Sales results remained healthy for Detroit s Big Three automakers, with sales increases of 6% for both General Motors Company and Fiat Chrysler Automobiles, as well as a sales increase of 5% for Ford Motor Company. U.S. auto production is also on the rise. WardsAuto Group indicated U.S. light vehicle production totaled 1.0 million units in June 2015, increasing 5.5% from June Year-todate through June 2015, U.S. light vehicle production increased 2.7% to 6.0 million units. Production was strongest for light trucks, with lower or consistent production for cars. The Institute for Supply Management s purchasing manager s index ( PMI ), an indicator for manufacturing activity, declined from 53.5 in June 2015 to 52.7 in July. Month PMI July June 53.5 May 52.8 April 51.5 March 51.5 February 52.9 January December November 57.6 October 57.9 September 56.1 August 58.1 July 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. Due to a global supply glut, which resulted in a dramatic drop in crude oil and natural gas prices over the last year, oil and gas exploration fell in recent months. As of July 31, 2015, the U.S. rig count totaled 874 rigs, down by two rigs from the prior week and falling by 1,015 rigs from the same week in The Canadian rig count totaled 215 rigs, up by 15 rigs since the prior week but down 177 rigs from the prior year. Date The international rig count totaled 1,146 rigs in June 2015, down by 12 and 198 rigs from the prior month and year, respectively. U.S. Rig Count Change From Prior Year Canada Rig Count Change From Prior Year July 31, (1,015) 215 (177) July 3, (1,012) 139 (118) June (950) 116 (98) May 1, (949) 79 (84) April 2 1,028 (790) 100 (135) March 6 1,192 (600) 300 (287) February 6 1,456 (315) 381 (240) January 2, , (74) December 5, , November 7 1, October 3 1, September 5 1, August 8 1, July 3, ,

5 Recent 4 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. Gross margins for non-ferrous metals decreased, as prices for a broad base of non-ferrous metals were significantly impacted by negative economic data from China, although contracted material remained protected. Based on industry trends, NOLVs for ferrous metals over the past few months have decreased versus the prior year, as prices remain well below last year s levels due to sluggish demand and cheap imports; however, NOLVs for ferrous scrap and flat rolled steel remained relatively stable versus the prior quarter, in line with pricing. NOLVs for non-ferrous metals decreased from the prior year, as concerns regarding economic growth in China, the world s largest consumer of base metals, as well as the Greek debt crisis and strong U.S. dollar, have continued to put downward pricing pressure on LME-traded metals. Moreover, overproduction of aluminum has further negatively impacted demand and pricing for this metal. Sales of ferrous inventory were mixed over the past three months, with sales growth for companies serving the automotive and construction industries, as well as sales declines for companies serving the oil and gas market, and for service centers whose customers are maintaining lighter inventories. Sales of non-ferrous inventory increased, with demand rising from the automotive, construction, and aerospace sectors. Gross margins decreased for ferrous metals versus the prior year due to the decline in pricing; however, margins improved over the past quarter, as many companies have now destocked their previous supplies of high-cost inventory and the market has stabilized, resulting in inventory costs that are now better aligned to market pricing than at any other point in 2015 thus far. Inventory levels decreased for ferrous metals over the past quarter as the industry continued to destock inventories, companies throughout the supply chain maintained leaner inventories, and imports declined compared to earlier in Inventory levels for non-ferrous metals remained consistent, as companies continued to manage inventory levels relative to pricing fluctuations. However, aluminum inventories have risen due to an increase in imports. Prices for ferrous metals were mixed in recent months, as the scrap and flat rolled steel markets stabilized due to fewer downstream imports and price increases implemented by mills in June, while prices for tubing remained depressed and prices for rebar and steel plate fell amid the presence of competitive imports. However, declining iron ore prices could negatively impact scrap and flat rolled steel prices in the near future. Prices for non-ferrous metals decreased as China s pullback in demand for all non-ferrous metals resulted in global oversupply issues, and as the seasonal summer slowdown has resulted in light demand volumes domestically. 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-specific factors. In addition, as market prices are volatile, a change in metals market price trends would have an impact on recovery values. 4

6 Carbon 5 Steel Shredded carbon steel scrap prices averaged $264 per gross ton in July 2015, declining from $282 per gross ton the prior month. After inching up in the second quarter of 2015 as steel mills began to restock for the spring season, scrap prices fell in July as mill demand slackened, export sales prices and volumes dropped, and dockside scrap tonnage moved inland. With expectations of a further scrap price decline in August, some mills canceled late July scrap orders in favor of cheaper pricing the following month. According to Steel Business Briefing ( SBB ), early August purchase prices were down $15 to $30 per gross ton from July, averaging $240 per gross ton. Larger drops are anticipated for shredded scrap than for busheling. August demand was partially dampened by maintenance shutdowns and energy curtailments at certain mills. However, concerns about scrap availability continue to grow. In the week ended August 1, 2015, domestic raw steel production totaled 1,760,000 net tons, rising 1.1% versus the prior week but declining 8.0% from the same week in The American Iron and Steel Institute reported that capability utilization reached 76.6%, up from 72.8% the prior week but down from 79.6% the prior year. Week Ended Production Change vs. (Millions) Prior Year January 31, (2.3%) February (5.9%) March (10.1%) April (7.3%) May (6.9%) June (8.6%) July (9.1%) August 1, (8.0%) Year-to-Date August 1, (7.7%) Adjusted year-to-date production through August 1, 2015 totaled 52,247,000 net tons at a capability utilization rate of 72.5%, down 7.7% from 56,619,000 net tons during the same period in 2014, when the capability utilization rate was 77.6%. Utilization rates above 80% typically denote optimal profitability. The decline in utilization over the past year reflects excess capacity. $400 Shredded Carbon Steel Scrap North America Domestic Delivered Mill Monthly Average Price Per Gross Ton $380 $360 $340 $320 $300 $280 $260 $240 5

7 Carbon 6 Steel Hot rolled coil steel prices averaged $465 per net ton in July 2015, increasing slightly from $463 the prior month but remaining below the July 2014 average of $675. Cold rolled coil steel prices averaged $585 per net ton in July 2015, up slightly from $580 in June but remaining below the July 2014 average of $800. Some service centers noted slight erosion in flat rolled steel prices from certain mills, while other buyers witnessed unchanged prices. The domestic flat rolled steel market has been relatively stable in recent months, with price hikes from mills in June partially offset by tepid end-market demand and short lead times. However, certain market participants believe flat rolled steel prices may be poised to drop in August in the wake of lower ferrous scrap prices. As a result, many buyers purchased only based on their immediate needs, anticipating lower prices for future purchases. In early August 2015, average hot and cold rolled steel prices remained steady at $465 and $585 per gross ton, respectively. $850 Hot Rolled Coil and Cold Rolled Coil North America Domestic FOB U.S. Midwest Mill Monthly Average Price Per Net Ton $800 $750 $700 $650 $600 $550 $500 $450 $400 6

8 Carbon 7 Steel A36 steel plate prices averaged $572 per net ton in July 2015, decreasing from $585 in June. Plate prices have continued to drop as lower-priced imports flooded the market. High imports and high inventory levels earlier in the year prevented previously announced mill price increases to take hold in the market. Although steel service centers have since been destocking, SBB reported that according to a service center source, Inventories can t fall fast enough when we are still getting 100,000 metric tons, plus or minus tons, per month. Higher-than-expected levels of cut-to-length plate imports arrived in recent months, including 102,594 metric tons in June according to final import data and 105,936 metric tons in July according to issued import licenses. Although these levels remain below the prior 12-month average of 150,097 metric tons per month, domestic market suppliers had hoped for a substantial drop below 100,000 metric tons per month during the summer. Lead times from mills remain relatively low, averaging three weeks. A distributor source of SBB indicated that the weak lead times lend no pricing power to the plate market. The single piece of good news on the plate front is that the cheaper inventory is starting to cycle through, but it s nowhere even remotely close to where we would need to be going forward. In early August 2015, A36 steel plate prices slipped further to an average of $550 per metric ton. Steel Plate (A36) North America Domestic FOB U.S. Midwest Mill Monthly Average Price Per Net Ton $900 $850 $800 $750 $700 $650 $600 $550 7

9 Carbon 8 Steel Prices for rebar, U.S. domestic ex-works Southeast, averaged $562 per net ton in July 2015, down from $566 the prior month and remaining below the July 2014 average of $632, and remained relatively stable in early August Rebar prices have deteriorated due to strong domestic competition from mills and brokers, influenced by heated competition from imported rebar and fabricators using imported rebar. Imported rebar from Turkey has been pressuring the domestic market, with import offers for October arrival in Houston falling below $440 per net ton on a loadedtruck basis, versus $470 per net ton for current imports sitting at the port. Much of the imported rebar is used in Florida. As a result, rebar buyers Southeastern U.S. rebar buyers in particular have been more successful in negotiating price concessions from domestic mills. SBB reported that one Southeastern rebar fabricator negotiated rebar prices from three mills down to a range of $545 to $565 per net ton, ex-works, from a previous range of $560 to $575 per net ton the previous month. Another fabricator purchased rebar at spot prices of $550 per net ton using a foreign fighter discount program. In addition, other rebar buyers cited recent experiences in which mills not only reduced spot prices, but eliminated extras for freight and length. Prices for oil country tubular goods ( OCTG ) dropped in early 2015 in the wake of falling oil prices. Pricing for J55 ERW pipe (4 1/2 to 8 5/8 ) inched up to a range of $990 to $1,050 per net ton in March through May 2015 amid recent increases in crude oil prices before slipping to a range of $950 to $1,000 per net ton in June and July 2015 due to slack demand. Pricing for ERW black line pipe (4 ) remained stable at a range of $800 to $820 per net ton from April through July OCTG imports have recently declined. According to the U.S. Census Bureau, OCTG imports totaled 103,091 metric tons in June 2015, decreasing from 151,808 metric tons in May and remaining well below the June 2014 level of 319,020 metric tons. Long Products/Rebar U.S. Domestic EXW Southeast Monthly Average Price Per Net Ton $650 $640 $630 $620 $610 $600 $590 $580 $570 $560 8

10 Tin 9 The market price for tin on the LME averaged $6.79 per pound in July 2015, slipping from $6.81 in June and remaining below the July 2014 average of $ Tin prices have declined nearly 23% over the past year due to soft demand from the electronics sector and abundant supplies, including record tin shipments from Myanmar to the already oversupplied Chinese market. Export activity ramped up in Indonesia, the world s top tin exporter, in July but is set to stall due to a change in export rules effective August 1, 2015, which are intended to address environmental damage and smuggling while enforcing royalty and tax payments. Local smelters have faced delays in receiving export approvals. $10.50 $10.00 $9.50 $9.00 $8.50 $8.00 $7.50 $7.00 $6.50 Tin LME Monthly Average Price Per Pound If you can t export the tin ingot, your cash flow will be affected, said Jabin Sufianto, president of the Indonesian Association of Tin Exporters. So I believe the production will be lower, and as an impact, the price will increase. But I don t think it s going to be a huge problem because the government will be helping us getting our licenses. Lead The LME market price for lead averaged $0.80 per pound in July 2015, decreasing from $0.83 the prior month and remaining below the July 2014 average of $0.99. After rising in April and May 2015 due to production cuts and lower LME warehouse stocks, prices returned to a declining trend in June and July as a result of global economic conditions, including China s weakening stock market and the Greek debt crisis. In addition, the International Lead and Zinc Study Group reported in July that the world supply of refined lead metal exceeded demand by 7,000 metric tons over the five months from January to May 2015, despite a reduction in lead inventories at LME warehouses. Lead-acid batteries, a major application of lead, are beginning to lose ground to lithium batteries, which are used in many modern technologies such as cell phones and lap tops. Solar energy has largely been stored using lead-acid batteries thus far despite their lower energy density, given the historical cost-effectiveness of lead-acid batteries versus lithium batteries. Companies such as Outback Power and Princeton Power Systems have implemented large lead-acid $1.02 $1.00 $0.98 $0.96 $0.94 $0.92 $0.90 $0.88 $0.86 $0.84 $0.82 $0.80 $0.78 Lead LME Monthly Average Price Per Pound battery projects. However, Tesla Motors recently announced a new suite of residential lithium batteries that will allow households to store renewable energy, including solar energy, given the declining costs of lithium-ion energy storage. Additional research and development activity may therefore be required to keep lead-acid batteries competitive with their lithium counterparts. 9

11 Zinc 10 The market price for zinc on the LME averaged $0.91 per pound in July 2015, decreasing from $0.95 the prior month and remaining below the July 2014 average of $1.05. After increasing in April and May 2015 upon news of upcoming mine closures as well as tightening supplies, prices returned to a declining trend in June and July as the $1.06 $1.04 $1.02 $1.00 $0.98 $0.96 $0.94 $0.92 $0.90 global zinc market actually recorded a small surplus. In addition, investors were concerned by a slowing Chinese economy and a strengthening U.S. dollar. Zinc LME Monthly Average Price Per Pound According to the World Bureau of Metal Statistics, global zinc supplies from January through May 2015 exceeded demand by 214,000 tons, which is a contrast to the deficit of 145,000 tons for the entire year of The surplus was partially driven by booming Chinese production of locally refined zinc, which climbed 14.4% versus the same period in 2014, compared to an overall global zinc production increase of 8.2%. At the same time, Chinese apparent demand fell 0.2% over the past year, marking China s move from being a net consumer to a net producer of zinc. Copper The LME market price for copper averaged $2.48 per pound in July 2015, decreasing from $2.65 the prior month and remaining below the July 2014 average of $3.22. After increasing from March through May 2015 due to lower-thanexpected supplies, China s efforts to stimulate its economy, and an anticipated lower U.S. dollar, copper prices fell in June and July as China s economic growth remained sluggish and the U.S. dollar actually strengthened. According to data released by the International Copper Study Group in July 2015, the refined copper market registered a surplus of 33,000 tons in April 2015 after seasonal adjustments. $3.30 $3.20 $3.10 $3.00 $2.90 $2.80 $2.70 $2.60 $2.50 $2.40 Copper LME Monthly Average Price Per Pound Global refined copper production increased 3% in the first four months of 2015, including 6% growth in China, while global refined copper usage declined 4%, including a 5% drop in China. 10

12 Aluminum 11 Prices for P1020 primary aluminum ingot averaged $0.82 per pound in July 2015, declining from $0.85 the prior month and $1.08 the prior year. Despite relatively healthy aluminum demand in North America, a global supply glut has dragged down market prices. According to the Aluminum Association, North American aluminum demand is higher than in 2014, with April 2015 aluminum mill shipments up 7.8% versus the same month in The aluminum price is going to be pretty horrible for a while, until we see some western world production cuts, said Citigroup analyst David Wilson. However, high aluminum production in Asia is driving the global market toward a surplus, with Chinese production accounting for 1.8 million metric tons of the expected 2016 surplus estimated at 2.1 million metric tons. Metal Miner reported that global primary aluminum production is up 12% versus a year ago, reflecting the fastest growth rate since $1.20 P1020 Primary Aluminum Ingot Delivered U.S. Midwest Monthly Average Price Per Pound $1.15 $1.10 $1.05 $1.00 $0.95 $0.90 $0.85 $

13 Nickel 12 Nickel prices on the LME averaged $5.16 per pound in July 2015, down from $5.80 the prior month and remaining below the July 2014 average of $8.64. Nickel prices have generally declined thus far this year, influenced by high production as well as economic uncertainty in Europe and China. $9.00 $8.50 $8.00 $7.50 $7.00 $6.50 $6.00 $5.50 Nickel LME Monthly Average Price Per Pound Nickel mine output, excluding Indonesia, increased 7% in the first four months of 2015 versus the same $5.00 period in 2014, according to The International Nickel Study Group. The higher output was primarily driven by consistently strong production from the Philippines, in addition to bolstered output in the U.S., Canada, Madagascar, New Caledonia, and Papua New Guinea. Sherritt International, a Canadian resource company, indicated plans to cut spending if nickel prices remain depressed; however, the company will not consider curtailing nickel output. Stainless Steel In July 2015, the prices for grades 301 (7%), 304 (8%), and 316 stainless steel slid down to $1.12, $1.19, and $1.55 per pound, respectively, versus $1.13, $1.21, and $1.58 per pound, respectively, the prior month. Stainless steel prices also remained below July 2014 levels. Most end-markets continue to demonstrate healthy demand for stainless steel products, including the automotive, residential appliance, and foodservice/food processing equipment end-markets, although demand has fallen from the energy end-market due to the drop in oil prices over the last year. $2.20 $2.10 $2.00 $1.90 $1.80 $1.70 $1.60 $1.50 $1.40 $1.30 $1.20 $1.10 $1.00 Stainless Steel Flat Rolled Coil Monthly Average Base Selling Price Per Pound Less Discounts, Including Surcharges Despite moderate growth in stainless steel demand, stainless steel prices declined from January through May 2015 due to high supplies in the North American market and lower surcharges driven by successive months of declines in the price of nickel, a primary input for stainless steel. Service centers continue to sell through inventory backlogs, and their slowdown in purchasing has resulted in bloated supplies at both domestic and Asian mills. Stainless steel prices inched up in June 2015, partially influenced by an 8% decline in U.S. imports of stainless steel the prior month, but fell again in July amid short lead times. 12

14 13 Metals Reference Sheet YEAR AGO MAY 2015 JUNE 2015 JULY 2015 AUTO SHRED $373/GT $243/GT $270/GT $267/GT HMS (HEAVY MELT STEEL) $363/GT $229/GT $246/GT $242/GT BUSHLING $397/GT $240/GT $265/GT $270/GT CARBON FLAT ROLLED SHEET COIL BASE PRICE YEAR AGO MAY 2015 JUNE 2015 JULY 2015 HOT BANDS $670/NT $451/NT $460/NT $464/NT COLD ROLLED $790/NT $571/NT $578/NT $585/NT HOT-DIPPED COATED GALVANIZED $875/NT $640/NT $652/NT $659/NT CARBON STEEL PLATES BASE PRICE YEAR AGO MAY 2015 JUNE 2015 JULY 2015 PLATE COILS AND STRIP MILL COILS $645 - $670/NT $465 - $490/NT $475 - $495/NT $475 - $495/NT DISCRETE CARBON STEEL $860/NT $579/NT $581/NT $568/NT PLATES* ALLOYS PLATES $1,220/NT $964/NT $960/NT $960/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 MAY 2015 JUNE 2015 JULY /2 X 4 FLATS* $815 Avg/NT $727 Avg/NT $727 Avg/NT $727 Avg/NT 2 X 2 X 1/4 ANGLES* $815 Avg/NT $723 Avg/NT $723 Avg/NT $723 Avg/NT REBAR COILS, GRADE 60: #3 TO #5 SIZES MERCHANT BAR (FOB MIDWEST MILL) $675 Avg/NT $583 Avg/NT $580 Avg/NT $580 Avg/NT $775 - $805/NT $683 - $703/NT $683 - $703/NT $668 - $678/NT *Variances include East to West Coast markets and variances in rebates. 13

15 14 Metals Reference Sheet SBQ BARS (INCLUDING SURCHARGES, NET OF REBATES) YEAR AGO MAY 2015 JUNE 2015 JULY 2015 HOT ROLLED DIAMETER $45.00/CWT ($900/NT) $38.50/CWT ($770/NT) $37.00/CWT ($740/NT) $37.00/CWT ($740/NT) HOT ROLLED DIAMETER $54.95/CWT ($1,099/NT) $46.00/CWT ($920/NT) $45.00/CWT ($900/NT) $44.27/CWT ($885/NT) COLD FINISHED C DIAMETER $58.90/CWT ($1,178/NT) $50.50/CWT ($1,010/NT) $50.50/CWT ($1,010/NT) $50.50/CWT ($1,010/NT) OCTG AND LINE PIPE SAMPLING YEAR AGO MAY 2015 JUNE 2015 JULY 2015 J55 ERW 4 1/2 TO 8 5/8 $1,200 - $1,250/NT $990 - $1,050/NT $950 - $1,000/NT $950 - $1,000/NT LINE PIPE ERW 4 BLACK $935 - $945/NT $800 - $820/NT $800 - $820/NT $800 - $820/NT ALUMINUM YEAR AGO MAY 2015 JUNE 2015 JULY 2015 ALUMINUM (LME VALUES) $0.8824/LB $0.8188/LB $0.7636/LB $0.7430/LB ALUMINUM NA (HIGH GRADE P1020) MWTP (MIDWEST PREMIUM) ALUMINUM ALLOY A380.1, LME VALUES $1.0805/LB $0.9205/LB $0.8460/LB $0.8237/LB $0.1988/LB $0.1033/LB $0.0820/LB $0.0804/LB $1.1200/LB $0.9890/LB $0.9638/LB $0.9270/LB NICKEL AND COPPER YEAR AGO MAY 2015 JUNE 2015 JULY 2015 NICKEL, LME VALUES $8.6411/LB $6.1276/LB $5.7968/LB $5.1645/LB COPPER HIGH GRADE A, LME VALUES $3.2226/LB $2.8579/LB $2.6461/LB $2.4752/LB 14

16 15 Metals Reference Sheet (Product prices using current average distributor discount) X 48/60 WIDE X COIL YEAR AGO MAY 2015 JUNE 2015 JULY 2015 T304* $1.5073/LB $1.1818/LB $1.2069/LB $1.1876/LB T316/316L* $2.1066/LB $1.5632/LB $1.5826/LB $1.5485/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. YEAR AGO MAY 2015 JUNE 2015 JULY 2015 T304/304L $0.8913/LB $0.5658/LB $0.5909/LB $0.5716/LB T316/316L $1.3086/LB $0.7652/LB $0.7846/LB $0.7505/LB 360, , , , , , , , , , , , ,000 LME Copper Warehouse Stocks Monthly Average Metric Tons July 2014 Through July 2015 LME Aluminum Warehouse Stocks Monthly Average Metric Tons July 2014 Through July ,000,000 4,800,000 4,600,000 4,400,000 4,200,000 4,000,000 3,800,000 3,600,000 3,400,000 15

17 16 Experience GA has worked with and appraised a number of companies within the metals industry, including industry leaders in steel and aluminum production and processing. GA s extensive record of metals inventory valuations also features appraisals for companies throughout the entire metal supply chain, including foreign and domestic metal- and steelproducing mills; metal converters that produce tubing and pipe, as well as expanded, grating, and perforated metal types; metal service centers/processors as well as 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 $31.2 million to $1.2 billion, including the following sampling: GA s extensive appraisal experience also includes valuations of the following major businesses in the metals industry: A processor of stainless steel and brass pipe fittings; A custom-fabricator of roll form metal products; A manufacturer of aluminum light poles; A manufacturer of carbide drill bits; A processor of metal coils into roofing systems; A steel distributor and service center; A manufacturer of metal storage solutions; and An importer and master distributor of stainless steel, nickel alloy, aluminum, and carbon steel products. 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 Pacific 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. 16

18 Monitor 17 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 reflects pricing and market trends over the prior quarter, as well as forward-looking projections, in order to reflect significant 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 significant raw materials, regardless of the sector of the finished products. This assures that all appraisals from GA reflect 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 Officer. 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. 17

19 Appraisal 18 & Valuation Team Mike Marchlik National Sales & Marketing Director (818) Ryan Mulcunry Executive Vice President - Northeast Region, Canada & Europe rmulcunry@greatamerican.com (617) David Seiden Executive Vice President, Southeast Region dseiden@greatamerican.com (770) Bill Soncini Senior Vice President, Midwest Region bsoncini@greatamerican.com (312) Jennie Kim Vice President, Western Region jkim@greatamerican.com (818) Drew Jakubek Managing Director, Southwest Region djakubek@greatamerican.com (972) Daniel Williams Managing Director, New York Region dwilliams@greatamerican.com (646) About Great American Group Ken Bloore Chief Operating Officer kbloore@greatamerican.com (818) Michael Petruski Executive Vice President, General Manager mpetruski@greatamerican.com (818) Greg Trilevsky Senior Appraiser Metals and Manufacturing gtrilevsky@greatamerican.com (909) Alex Tereszcuk Senior Appraiser Metals and Manufacturing atereszcuk@greatamerican.com (336) Dan Tracy Senior Appraiser Metals and Manufacturing dtracy@greatamerican.com (412) John Little Senior Appraiser Scrap Recycling jlittle@greatamerican.com (864) Ryan Lutz Senior Project Manager Metals Specialist rlutz@greatamerican.com (781) 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 firms. In addition to the Metals Monitor, GA also provides clients with industry expertise in the form of monitors for the chemicals and plastics, food, and building products sectors, among many others. For more information, please visit Great American Group, LLC is a wholly owned subsidiary of B. Riley Financial, Inc. (NASDAQ: RILY), a diversified provider of collaborative financial and business advisory services through several subsidiaries, including: B. Riley & Co. LLC, a leading investment bank 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 office practice and wealth management firm focused on the needs of ultra-high 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 offices in major financial markets throughout the United States and Europe. For more information on B. Riley Financial, Inc., please visit Headquarters Burbank Blvd. Suite 300 South Woodland Hills, CA GREAT 18