Platt s Aluminum Symposium January 14, Kevin Ferguson Vice President, Procurement

Transcription

1 Platt s Aluminum Symposium January 14, 2014 Kevin Ferguson Vice President, Procurement

2 Disclaimer The longer you do something, no matter how much you think you know, you will find out later in life, that you didn t know as much as you thought Nick Gibbs President & CEO Gibbs Die Casting

3 Our Business High technology recycling of aluminum extrusion scrap back into Aluminum Extrusion Ingot

4 Our Plant in Bluffton, IN

5 Operating History and Highlights Plant construction and first shipments 2008 Annual shipments of 220 million pounds Broad 6XXX series alloy supply, mainly to Midwest extruders 7 through 16 capabilities Total enterprise employment of 70 Entering our 6 th year of operation

6 North American Scrap Market Pressures The lingering effects of the Recession Increased focus on utilizing scrap from a more broad range of smelters Scrap Consumption trends Historical prices and trends P1020 availability Margin compression

7 Lingering Effects of the Recession Since the low point, the extrusion market is only half way back to the previous market peak Source: Davenport Equity

8 Scrap Consumption Trends Source: Davenport Equity

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10 Spot Scrap Purchase Trend

11 Why are we seeing a tight market? Production continues to grow and out paces scrap generation Scrap smelters are pulling a vacuum on a lagging supply of scrap due to the recession A strong automotive market has forced use of some mill grade scrap in 380 type production Weak LME pricing does not support a total sell off of scrap units Prime units are more difficult to procure

12 Agenda

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14 Receipt pace less toll scrap

15 Physical Aluminum Tightness Industry-Wide Lack of Primary aluminum Tightness partly structural (and forever) due to waning domestic smelter capacity Partly temporary due to the financing arrangements Green consumer and corporate trends Shifting historically primary use to scrap-based supply Scrap tightness in all Aluminum market sectors Automotive, B & C, Truck and Trailer, sheet...

16 Continued tightness Automotive sheet demand expected to grow 5-fold by 2020 Increasing Global scrap consumption Increased smelter/cast house capacity Green Field and Brown Field investment MW Premium is not yet able to lure P1020 units away from financial positions and off shore supply Source: Davenport Equity

17 Possible Scrap Adjustment Mechanics Billet premiums negotiated annually Scrap adjustments applied monthly and include a band width Scrap adjustments defined using applicable industry data that is easily understood by the end users Can be regional Can be tied to the type of billet being supplied Should utilize industry indexes: Platt s, Harbor, Metal Prices, AMM... Scrap-spread adjustments, periodically, need to be applied to yearly sales agreements to protect the industry from spread volatility Essential for a financially healthy, scrap-based supply chain

18 Conclusion Re-melt billet suppliers are facing 25 to 50% erosions in scrap spreads within a few months time on occasion The industry needs transparent scrap-spread metrics Each scrap-intensive aluminum industry needs to implement scrap-adjustment mechanisms in contracts MW Premium must maintain transparency to support contact pricing Remember my Disclaimer