23 rd International Recycled Aluminum Conference Madrid, Spain November 16, 2015 North American Aluminum Scrap Markets David C. Rosenblum OmniSource Corporation is a wholly owned subsidiary of Steel Dynamics, Inc. 1
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Big is Bad The grass is brown all over The data is all manipulated (Retired Chinese Ecomonist) My life sucks too (Asian Secondary Aluminum Smelter) It didn t happen on my watch I wasn t watching 3
Talking Points 1. 2015 N. A. Scrap Supply / Demand 2. N. A. Automotive Sheet Growth s impact on scrap flows 3. 2016 Comments / Forecasts 4
OmniSource Statistics (Per Annum) Ferrous Scrap 6mm MT Non-Ferrous 600,000 MT Superior Aluminum Alloys 110,000 MT Heavy Media Separation 110,000 MT (in) Copper Granulator 52,000 MT Aluminum Granulator 27,000 MT Stainless Steel 130,000 MT SDI - Lafarga 90,000 MT 5
2015 North American Scrap Supply / Demand 6
1 st Half 2015 N.A. Long Scrap 1. It s a softer Earth especially the BRIC countries 2. Stronger U.S. Dollar in Last Year 3. Year End inventory reductions in Q-4 2014 by primary producers, sheet mills, fabricators and secondaries led to a physical long in the marketplace 4. Sustainability and Closed Loop behaviors. a) Already a few years in the making increased rolling mills physical longs. 5. Logan Aluminum hot mill outage January 2015 50,000 MT Jan/Feb 7
Secondary Automotive Aluminum Units 1. Secondary automotive production in USA is Robust! a) Turnings are everywhere. 2. West Coast Port Strike a) Slowed exports due to Asian buyers who were short cash for new purchases 3. China s Green Fence repercussions a) New downstream sorting technologies have produced new grades of twitch. b) Less exports have led to greater volumes of Twitch in North America. 4. A380 price in USA keeps more scrap in North America a) During most of 2014/2015, A380 is greater than ADC12 by more than $200 pmt thus less exports of tense / taint tabor 8
North American Automotive Sheet Growth 9
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Automotive Scrap Market Impacts 1. Ford F150 production kicks into high gear a) Closed loop return scrap accelerates 2. North America is longer rolling capacity than casting capacity. a) Greater sheet ingot consumption creates more inhouse turn around scrap and negates third party scrap purchases. 11
Cansheet vs. Automotive Scrap Generation %Generated %Generated Cansheet 20% In Rolling Mill 18% In Can Plant Automotive 40% In Rolling Mill 40% Stamping Plant Surplus + 20% + 22% 12
Analysis of 6XXX Alloys 1. AA 6022 2. AA 6111 Percentage of Use Approximately 65% Si Fe Cu Mn Mg Cr AA 6022 0.8 1.5 0.05 0.20 0.01 0.11 0.02 0.10 0.45 0.7 0.10 AA 6111 0.6-1.1 0.40 0.50-0.9 0.10-0.45 0.50-1.0 0.1 Notes: 6022 can go to numerous primary and secondary consumers basis low iron and copper 6111 is more difficult to move into primary sheet mills or extruders due to copper and manganese 13
3. AA 5182 Analysis of 5XXX Alloys 4. AA 5086 Percentage of Use Approximately 35% 5. AA 5754 Si Fe Cu Mn Mg Cr AA 5182 0.20 0.35 0.15 0.20 0.50 4.0 5.0 0.1 AA 5086 0.40 0.50 0.10 0.20-0.7 3.5-4.5 0.05-0.2 AA 5754 0.40 0.40 0.10 0.50 2.6-3.6 0.30 Note: These are all high magnesium alloys. Not a problem for closed loop primary consumers. However, high magnesium will be problematic / costly for secondary smelter consumption. 14
New Automotive Sheet Capacity 2016-2020 Aleris Lewisport, KY $350 Million Auto Expansion Tri-Arrows Russellville, KY Auto Expansion approximately $250 $300 MM Constellium Wise Alloys Muscle Shoals, AL $1.4 Billion Expansion for auto sheet Working with Toyota / Kobe Alcoa San Antonio Micro-Mill 2017/2018 15
2016 Comments / Forecasts 16
105,000,000 DEMAND 104,846,000 103,000,000 101,000,000 100,026,000 99,000,000 97,000,000 96,927,000 95,000,000 93,000,000 93,443,000 91,000,000 90,249,000 89,000,000 87,000,000 87,397,000 88,114,000 85,000,000 2014 2015 2016 2017 2018 2019 2020 Global Light Vehicle Production 17
North American Raw Material Data Aggregation Services 18
Chinese GDP Growth (year-over-year) 19
1/2/15 1/9/15 1/16/15 1/23/15 1/30/15 2/6/15 2/13/15 2/20/15 2/27/15 3/6/15 3/13/15 3/20/15 3/27/15 4/3/15 4/10/15 4/17/15 4/24/15 5/1/15 5/8/15 5/15/15 5/22/15 5/29/15 6/5/15 6/12/15 6/19/15 6/26/15 7/3/15 7/10/15 7/17/15 7/24/15 7/31/15 8/7/15 8/14/15 8/21/15 8/28/15 9/4/15 9/11/15 9/18/15 9/25/15 10/2/15 10/9/15 Avg. 2500.00 USA MW US Trans Weekly vs. Platts A380 Weekly 2400.00 2300.00 2200.00 2100.00 A380 Primary 2000.00 1900.00 1800.00 1700.00 1600.00 20
2,300.00 Japan Primary vs. ADC12 Imports 2,200.00 2,100.00 ADC 12 2,000.00 Primary 1,900.00 1,800.00 1,700.00 1,600.00 January February March April May June July August September Source: Daiki Corporation, Japan 21
Europe Metal Market 2.150 2.050 1.950 1.850 1.750 1.650 1.550 1.450 1.350 Secondary MB 226 Primary LME 3M-Seller + MB Premium Metal Cost Primary & Secondary /t Nov. 14 Dez. 14 Jan. 15 Feb. 15 Mrz. 15 Apr. 15 Mai. 15 Jun. 15 Jul. 15 Aug. 15 Sep. 15 Okt. 15 1.818 1.825 1.830 1.876 1.980 2.062 2.109 2.063 1.994 1.906 1.819 1.720 2.037 1.962 1.984 2.004 1.985 1.929 1.794 1.698 1.689 1.547 1.542 1.497 Δ Absolut -220-137 -154-127 -5 133 315 364 305 359 277 223 226 Primary REAL ALLOY 22
2016 N. American Market Predictions 1. Automotive production will stay strong barring no major global events. 2. Platts A380 will stay higher in price than Platt s Midwest Transactions 3. Inbound volumes of secondary based post consumer scrap units have hit bottom and that will continue through 2016. 4. Tightening supplies of twitch due to ferrous price drops supply will not recover until ferrous prices rise in 2017?? 5. U.S. based secondary smelters will be as busy in 2016 as they were in 2015 maybe even busier. 6. In the next few years, prompt industrial automotive scrap will be far more plentiful than post consumer scrap. 23
Thank You 24