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1 February 2015 — Metals Monitor

1

Metals Monitor

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1 Trend Tracker

Ferrous: NOLVs decreased in recent months

due to reduced demand and high supplies

driven by falling oil prices, a strengthening

U.S. dollar, and rising imports.

Non-ferrous: NOLVs decreased in recent

months due to price declines for most base

metals.

Ferrous: Sales were mixed due to higher sales

to the automotive and construction industries,

as well as lower sales to the oil and gas

industry.

Non-ferrous: Sales remained consistent, with

no major shift in domestic demand.

Ferrous: Gross margins decreased due to a

sharp drop in market pricing for scrap and

finished steel.

Non-ferrous: Gross margins were mixed, as

trends varied based on companies’ inventory

management and purchase contracts.

Ferrous: Inventory levels increased, as a rise

in imports and low demand created high

supplies.

Non-ferrous: Inventory levels remained

consistent as companies managed inventory

levels relative to price fluctuations.

Ferrous: Prices decreased due to high

supplies, reduced demand related to falling oil

prices, the influx of lower-cost imports, and

export pricing reduced to boost export

demand in light of a strong U.S. dollar.

Non-ferrous: Pricing decreased as traders sold

off metals on the London Metal Exchange

(“LME”) in reaction to global economic

concerns, falling oil prices, the stronger U.S.

dollar, and an expected copper surplus.

Ferrous Metal Non-Ferrous Metal

NOLVs

Sales Trends

Gross Margin

Inventory

Pricing


2 Overview

The new year began on a rocky note for the metals market, with

January 2015 pricing for steel and base metals falling in the wake

of plunging oil prices. Moreover, steel prices weakened amid a

flood of cheap imports and excess capacity, while prices for

many non-ferrous metals felt the sting of a slowing Chinese

economy.

Crude oil pricing has dropped over 50% since

July 2014, prompting a production slowdown

in the energy sector, which accounts for

nearly 10% of U.S. steel consumption. With

reduced drilling activity, Baker Hughes, Inc.

(“Baker Hughes”) will slash jobs by nearly

7,000 workers. As a result, energy companies

are cutting purchases of steel pipes, which are

produced with flat rolled steel coil.

United States Steel Corporation (“U.S. Steel”)

plans to temporarily idle pipe manufacturing

plants and lay off a number of workers, and

certain other producers are following suit,

including TMK IPSCO and Evraz, Inc.

(“Evraz”). Tenaris SA also plans to reduce

production and lay off nearly 500 workers at

three U.S. plants due to low oil prices and

high U.S. imports of oil country tubular goods

(“OCTG”) from South Korea.

Declining oil prices have also spurred

investors to sell off metals commodities,

negatively impacting industrial metals prices

in recent months.

U.S. imports of finished steel are expected to

account for 28% of the finished steel market

for 2014, reaching an all-time record,

according to the American Iron and Steel

Institute (“AISI”). In January 2015, finished

steel imports swelled to nearly 3.9 million

tons, a 19.7% increase from the prior month’s

total, as indicated by the U.S. Commerce

Department.

The flow of imports is expected to remain

strong until at least the second quarter, as

mills had previously raised domestic prices at

a significant premium compared to global

prices, and American Metals Market

(“AMM”) reported the global steel industry’s

excess capacity is 25% above global steel

demand.

Excess capacity remains a major risk for the

steel market. Steelmakers have announced

the addition of capacity out to 2020, revealing

continued growth in investment, although

some capacity is slated to be removed over

the next decade. Against the current dour

backdrop of surplus supplies, many steel

mills are idling production of flat products to

head off further price declines.


3 Overview

For base metals, China’s economy is a

significant factor driving market conditions.

China is the world’s largest consumer of

industrial metals, accounting for nearly 40%

of consumption.

However, China’s recent double-digit growth,

which was a boon for the industrial metals

market, proved unsustainable. Growth is

expected to slow to 7% in 2015. The Russian

government is also causing concern, as the

effects of depressed crude oil prices and a

declining Russian currency remain to be seen.

Fortunately, the U.S. economy, at least, is on

the mend. Domestic unemployment is low,

equity markets are robust, and the U.S. dollar

is strong.

In addition, many other metals end-markets –

not counting the energy market – are

demonstrating solid improvement, with the

automotive market flourishing. The current

gloomy outlook therefore has room for some

optimism down the line.

Worthington Industries, Inc.

(“Worthington”) is seeking to acquire

Rome Strip Steel Co., a producer of cold

rolled strip steel, for approximately $55.5

million. The acquisition will add a third

cold rolled steel production facility to

Worthington’s collection, boosting overall

production capacity while expanding

Worthington’s ability to process close-

tolerance material with custom service

finishes.

Constellium NV (“Constellium”)

completed its acquisition of Wise Metals

Intermediate Holdings LLC (“Wise

Metals”), a producer of aluminum sheet

products for the beverage can industry, for

approximately $455 million in cash plus

the assumption of $945 million in debt

obligations. The acquisition is expected to

increase Constellium’s exposure to the

North American market, and will result in

increased investment in Wise Metals’

capacity.

Halliburton Co. is acquiring Baker

Hughes, a competing oilfield services

company, for $35 billion. Both companies

posted strong year-end sales results in

2014 but are now laying off workers as the

recent slowdown in drilling activity,

driven by falling oil prices, is poised to

hurt their 2015 performance. Weakening

drilling activity will reduce demand for

OCTG and other metal products used in

oil and gas exploration.


4 Overview

The automotive industry is a significant consumer of steel

and aluminum. The drop in gas prices in recent months,

driven by falling crude oil prices, contributed to positive

consumer sentiment toward new vehicle purchases,

particularly trucks and SUVs. Easier access to credit and

improved confidence in the economy also aided the rush

of buyers to the dealerships over the past three months.

In January 2015, auto sales reached a seasonally adjusted

annual sales rate of 16.7 million, which was well above the

January 2014 rate of 15.3 million and marked the highest

January annual rate since 2006, according to Autodata.

January sales totaled 1.2 million vehicles, climbing nearly

14% versus the same month in 2014. Nearly half of the

sales were comprised of pickup trucks, vans, and SUVs.

The “Big Three” Detroit automakers all enjoyed a double-

digit sales increase in January 2015 versus 2014, with

General Motors Company leading the pack at nearly 18%.

Ford Motor Company and Fiat Chrysler Automobiles

posted sales increases of 15.6% and 14%, respectively.

The Institute for Supply Management’s purchasing

manager’s index (“PMI”), an indicator for manufacturing

activity, generally declined in recent months. The PMI fell

1.6 points from 55.1 in December 2014 to 53.5 in January

2015, marking the lowest reading in the last year, while

the highest reading of 58.1 was registered in August 2014.

A PMI above 42.2 over a period of time typically denotes

an expansion of the overall economy.

The overall economy therefore grew for the 68th

consecutive month. As a reading above 50 signals

expansion in the production economy, the manufacturing

sector expanded for the 20th consecutive month, albeit at a

slower rate.

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.

In 2014, the vast majority of weekly U.S. and Canadian rig

counts increased year-over-year, buoyed by strong oil

demand and oil prices that remained above $90 per barrel

until October. However, as oil prices began to drop in

October, decreasing by more than half to a low of $44 per

barrel in late January 2015, oil and gas exploration soon

followed suit. The U.S. rig count began to log year-over-

year declines in January 2015 for the first time in a year.

As of January 30, 2015, the U.S. rig count totaled 1,543 rigs

drilling for oil or gas, decreasing by 90 rigs from the prior

week and 242 rigs from the same week in 2014. The

Canadian rig count totaled 394 rigs, down by 38 rigs from

the prior week and 214 rigs from the prior year. The

international rig count totaled 1,313 rigs in December

2014, down by 11 and 22 rigs versus the prior month and

prior year, respectively.

Month Seasonally Adjusted PMI

January 2015 53.5

December 2014 55.1

November 57.6

October 57.9

September 56.1

August 58.1

July 56.4

June 55.7

May 55.6

April 55.3

March 54.4

February 2014 54.3

Date

U.S.

Rig

Count

Change

From

Prior

Year

Canada

Rig

Count

Change

From

Prior

Year

January 30, 2015 1,543 (242) 394 (214)

January 2, 2015 1,811 60 208 (74)

December 5, 2014 1,920 145 422 20

November 7 1,925 171 410 32

October 3 1,922 166 430 69

September 5 1,925 158 414 25

August 8 1,908 130 213 29

July 3 1,874 117 309 95

June 6 1,860 95 214 62

May 2 1,854 90 163 42

April 4 1,818 80 235 29

March 7 1,792 40 587 7

February 7 1,771 12 621 (10)

January 10, 2014 1,754 (7) 477 (54)


5 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

decreased over the past few months due to reduced

scrap demand from mills, cheaper iron ore prices,

lower demand for flat rolled materials for pipe

production (which declined as a result of falling oil

prices), an influx of cheaper imports, and diminished

off-shore demand as a result of a stronger U.S. dollar.

NOLVs for non-ferrous metals decreased due to price

declines for most base metals in the wake of traders

selling off metals on the LME, as well as an

anticipated copper surplus in 2015.

Sales of ferrous inventory were mixed, with slightly

higher sales for companies serving the automotive

and construction industries, as well as plummeting

sales for companies serving the pipe and tube

market, which cut production as oil prices fell. Sales

of non-ferrous inventory remained consistent, as

there has been no major domestic demand shift, with

relatively flat sales volumes and minimal fluctuations

in pricing.

Gross margins decreased for ferrous metals as a

result of the sharp drop in market prices for scrap

and finished steel products, which resulted in service

centers holding inventory at costs above market

prices and producers agreeing to contracts with

lower margin spreads than expected. Gross margin

trends for non-ferrous metals were mixed, as margin

trends varied based on the ability of different

companies to manage inventory as market prices

changed, as well as the terms of purchase contracts.

Inventory levels for ferrous metals increased, as

imports climbed in 2014 while domestic shipments

trailed off during the fourth quarter; in addition, low

demand for pipe products as a result of lower oil

prices resulted in more inventory being stocked at

service centers. Inventory levels for non-ferrous

metals remained relatively consistent, as companies

continue to manage inventory levels relative to

pricing fluctuations.

Prices for ferrous metals decreased, as the drop in oil

prices reduced demand for pipe and tube products,

as well as the flat rolled steel used to produce them.

The high level of lower-cost imports also dragged

down domestic pricing as mills tried to remain

competitive. The strengthening U.S. dollar led to

fewer export markets for scrap, adding to the glut of

scrap material on the market and resulting in lower

export pricing to drum up demand.

Prices for non-ferrous metals decreased as concerns

over the continued global economic slowdown,

paired with a stronger U.S. dollar and falling oil

prices, encouraged traders to sell off metals on the

LME; in addition, copper prices further declined due

to an anticipated surplus in 2015.

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.


6 Carbon Steel

Shredded carbon steel scrap prices averaged $295 per

gross ton in January 2015, declining from $334 the prior

month and reaching a five-year low. Shredded scrap

prices had received a boost in December as mills sought

to stock up on material ahead of anticipated price

increases in January. However, scrap prices began to

fall by the end of December and are poised to decline

dramatically over the first quarter of 2015.

A surplus supply of scrap is dragging down prices,

driven by reduced mill demand and weak scrap exports

in light of a resilient U.S. dollar. According to Steel

Business Briefing (“SBB”), steel mills face fewer orders

for flat rolled steel and other downstream steel products

given the lower demand related to falling crude oil

prices. In addition, mills are competing with a flurry of

steel imports at significantly lower prices.

As a result, mills have reduced their production rates.

Scrap dealers, overwhelmed with copious supplies after

buying more than expected in early January, yielded to

scrap price decreases. According to The Steel Index

(“TSI”), the domestic scrap reference price for the last

week of January dropped 12.5% versus the prior week

as scrap dealers scrambled to move inventory.

The Ohio Valley and the Southeast are expected to

experience the largest drops in scrap pricing, according

to SBB. The Ohio Valley boasted the highest scrap

prices in the U.S., which will not be sustainable, and the

Southeast suffers the weakest demand from output-

slashing mills. By early February, Southeastern mills

were buying scrap at $90 to $110 per gross ton below

January prices.

Even the winter snowstorm sweeping through the

Northeast is not likely to significantly mitigate tumbling

scrap prices in February, given the lack of demand, and

may even encourage mills to cancel orders. However,

cut grades of scrap may gain slight price support from

the wintry weather based on a tighter supply.

“Further weakness in the scrap market is likely in

March unless we see steel imports begin to fade and

domestic production rates recover,” said John Ferriola,

Chief Executive Officer of steel mill Nucor Corporation

(“Nucor”), as reported by SBB.

Ferriola indicated the U.S. scrap market remains

significantly overpriced compared to the global scrap

markets and is therefore liable to weaken further.

$290

$310

$330

$350

$370

$390

$410

$430

$450

Shredded Carbon Steel ScrapNorth America Domestic Delivered MillMonthly Average Price Per Gross Ton

January 2014 To January 2015


7 Carbon Steel

In the week ended January 31, 2015, domestic raw steel

production totaled 1,782,000 net tons, slipping 2.4%

versus the prior week and 2.3% from the same week in

2014. The AISI reported that capability utilization

reached 75.4%, down slightly from 75.9% the previous

week and 75.8% the prior year.

Production decreased further in early February, falling

0.7% from the prior week and 3.0% from the prior year

to reach 1,769,000 net tons, with capability utilization

dropping to 74.8%.

Adjusted year-to-date production through February 7,

2015 totaled 9,877,000 net tons at a capability utilization

rate of 76.9%, down 0.3% from 9,903,000 net tons during

the same period in 2014, when the capability utilization

rate was 75.8%. Utilization rates above 80% typically

denote optimal profitability.

The recent decline in utilization reflects excess capacity,

which has driven major steel mills to idle their plants.

Week Ended

Production

(Million

Net Tons)

Change vs.

Prior Year

January 4, 2014 1.82 0.6%

February 1 1.80 (1.9%)

March 1 1.86 (0.7%)

April 5 1.76 (3.9%)

May 10 1.83 0.5%

June 21 1.85 3.1%

July 17 1.90 2.2%

August 30 1.86 3.0%

September 27 1.84 (1.5%)

October 25 1.84 0.2%

November 29 1.84 0.5%

December 27, 2014 1.75 (2.3%)

2014 Year-to-Date

Through December 27 95.5 0.7%

January 3, 2015 1.86 2.4%

January 10 1.90 4.1%

January 31 1.78 (2.3%)

February 7, 2015 1.77 (3.0%)

2015 Year-to-Date

Through February 7 9.88 (0.3%)


8 Carbon Steel

Hot rolled coil steel prices averaged $572 per net ton in

January 2015, declining from $615 the prior month and

remaining below the January 2014 average of $682.

Cold rolled coil steel prices averaged $711 per net ton in

January 2015, down from $746 in December and


Flat rolled steel pricing has dropped over the last

several months as demand dwindled amid falling crude

oil prices, with oil pipe producers buying less flat rolled

steel during production cuts, and as inflated domestic

pricing encouraged an influx of lower-cost imports.

Mills also faced fewer orders from distributors and

service centers, who built up inventories at year-end.

U.S. and Canadian service centers stocked 18% and 21%

more, respectively, in December 2014 versus 2013.

“Flat rolled and plate markets in particular have seen

inventories spike since mid-2014 as a result of higher

import volumes,” said Luke Folta, an analyst for Jeffries

LLC, as reported by AMM.

As U.S. steel mills reduced pricing in response to

market conditions, domestic pricing began to more

closely align with global pricing, with low hot rolled

coil tags potentially signaling a new normal.

However, as mills offered increasingly enticing prices to

lure in more orders, service centers began to fear

immediately losing value on their purchases, prompting

many to delay purchases until a bottom is reached. By

early February, hot and cold rolled steel prices had

slipped to averages of $540 and $680, respectively.

“People aren’t buying; they are reducing inventories

and seeing what the price is going to be next week,”

said a service center source, as reported by SBB.

Mills have therefore idled production in an effort to

curtail further price declines, resulting in a significant

reduction in U.S. steel sheet capacity by the end of

January. It remains to be seen when a pricing floor will

be reached. However, destocking at service centers is

expected to aid the market in the second quarter.

$550

$575

$600

$625

$650

$675

$700

$725

$750

$775

$800

$825

Hot Rolled Coil and Cold Rolled CoilNorth America Domestic FOB U.S. Midwest Mill

Monthly Average Price Per Net TonJanuary 2014 To January 2015


9 Carbon Steel

A36 steel plate prices averaged $754 per net ton in

January 2015, declining from $801 the prior month and


Plate prices have been sliding downward over the past

several months largely due to a relentless flood of

imports and a glut of inventory on the market.

The U.S. Census Bureau reported that preliminary U.S.

imports of cut-to-length plate totaled 169,909 metric

tons in January 2015, increasing 181% from the finalized

December 2014 level and more than double the January

2014 level. Year-to-date through November 2014,

imports of cut-to-length plate totaled 1.5 million metric

tons, increasing 76% from the same period in 2013.

Plate prices have reached their lowest point since

October 2013 as domestic mills fought to remain

competitive. However, their price cuts may have come

too late, with North American tags now set to actually

fall below import tags. While this could discourage

large import buys, it does nothing to shrink the

abundance of imported supplies already on the water,

at the ports, or in warehouses.

“The transaction number for plate has really gotten ugly

on the street,” said one East Coast service center source,

as reported by AMM. “I’ve got mills, whatever I need,

they’ll give me. But I’m afraid to put something out

there, have them bite, and then be able to buy

something cheaper the next week.”

As shredded scrap pricing is expected to drop $50 per

gross ton in February, buyers fear further price declines

are in store. Service centers in particular maintain

ample inventory, and are therefore deferring purchases.

“Right now, it is a matter of how long can you go

without ordering,” said a Northeast plate source, as

reported by SBB. “With about four months of

inventory, nobody needs anything right now, unless it

is a special order.”

According to TSI, the domestic plate reference price for

the last week of January dropped by $8.00 per net ton

versus the prior week to $739 per net ton. By early

February, the average price for A36 plate slipped to

$705 per net ton, ex-works Southeastern mill.

$750

$760

$770

$780

$790

$800

$810

$820

$830

$840

$850

$860

Steel Plate (A36)North America Domestic FOB U.S. Midwest Mill



10 Carbon Steel

Prices for rebar, FOB Midwest mill, averaged $645 per

net ton in January 2015, down from $663 the prior

month and remaining below the January 2014 average

of $660. Prices for rebar, ex-works U.S. Southeast,

averaged $605 per net ton in January 2015, down from

$615 the prior month and $644 the prior year.

Pricing for rebar and merchant bar remained relatively

steady at the end of 2014. However, the recent drop in

ferrous scrap pricing and the continued flow of lower-

cost rebar imports, particularly from Turkey, are placing

downward pricing pressure on domestic rebar.

U.S. imports of rebar are set to reach 118,835 metric tons

in January 2015, with nearly 86% slated to arrive from

Turkey, according to the U.S. Commerce Department.

The January import level marks a 41.8% increase from

the prior month’s level.

In January, Nucor implemented price cuts of $25 per ton

for rebar and $50 per ton for merchant bar in response

to the current market. However, imports remain as

much as $100 per ton below domestic prices; as a result,

price cuts by domestic mills may do little to aid the U.S.

market. As Nucor is a leader in the rebar market,

buyers fear the mill’s price-slashing response portends a

falling market as other mills follow suit.

“Anybody who’s got inventory just saw their inventory

devalued,” said a rebar source, as reported by AMM.

Many buyers are only purchasing to fulfill their

immediate needs, as they expect prices to drop further

in February in response to lower scrap pricing. Traders

are delaying purchases in anticipation of lower import

offers as scrap prices fall. The drop in rebar and

merchant bar pricing will likely weaken the market this

year in spite of demand from strong construction

activity, as margins are expected to be tight.

OCTG prices are finally starting to feel the impact of

falling oil prices, high imports, and lower flat rolled

steel pricing. According to Platts, after remaining

consistent at a range of $1,180 to $1,230 per net ton from

November through January, pricing for J55 ERW (4 1/2”

to 8 5/8”) dropped to a range of $980 to $1,030 in

February month-to-date. Pricing for ERW black line

pipe (4”) remained stable at a range of $915 to $925 per

net ton in the last three months before decreasing to a

range of $865 to $875 in February month-to-date.

U.S. OCTG imports climbed an estimated 59.6% to reach

47,900 tons in January versus December. As a result,

U.S. Steel, Evraz, TMK IPSCO, and other producers are

cutting production and laying off workers.

$644

$646

$648

$650

$652

$654

$656

$658

$660

$662

$664

$666

Long Products/RebarNorth America Domestic FOB U.S. Midwest Mill



11 Tin

The market price for tin on the LME

averaged $8.83 per pound in

January 2015, slipping from $8.99 in

December 2014 and remaining

below the January 2014 average of

$10.01.

U.S. tin plate imports increased 30%

in 2014 versus the prior year, while

U.S. tin plate production fell 5.7% in

the first 11 months of 2014,

according to industry analyst

Charles Bradford. U.S. Steel, the

largest domestic tin producer, has been hit hard by cheaper tin imports and plans to idle a tin mill this spring. Chinese

imports of tin ores and concentrates jumped 84% in 2014 versus 2013, while Chinese tin production climbed 22%.

According to Barron’s, Chinese tin consumption is expected to expand further this year as tin usage increases in new

electronics products; at the same time, however, China and Indonesia will face mining difficulties due to declining ore

grades. As a result, the outlook for tin pricing is brighter than last year, particularly in the second half of 2015. Capital

Economics projects tin pricing will reach $10.27 per pound by the end of 2015.

The LME market price for lead averaged $0.83 per pound in January 2015, decreasing from $0.88 the prior month and

remaining below the January 2014 average of $0.97 as the market experienced a mild surplus. The International Lead

and Zinc Study Group (“ILZSG”) reported global supply and demand for refined lead metal were nearly in balance in

2014, with total reported stock levels decreasing by 40,000 to reach a surplus of only 1,000 tons. The ILZSG forecasts

global demand for refined lead metal will increase 2.1% in 2015, despite an expected slowdown in demand growth in

China, as e-bikes (which represent a major share of Chinese automotive lead-acid battery sales) are slated to experience

slower output growth. U.S. lead usage is set to remain flat. Meanwhile, the global lead supply will fall amid mine and

plant closures. The ILZSG therefore predicts a modest deficit of approximately 23,000 metric tons in 2015.

Lead scrap prices

dropped to an average

of $73 per

hundredweight (“cwt”)

in the last week of

January versus $75 the

prior week, while prices

for whole lead batteries

fell to an average of $34

per cwt versus $35, due

to excess supplies and

declining lead prices on

the LME.

Lead

$8.60

$8.80

$9.00

$9.20

$9.40

$9.60

$9.80

$10.00

$10.20

$10.40

$10.60

$10.80

Tin LME Monthly Average Price Per PoundJanuary 2014 To January 2015

$0.82

$0.84

$0.86

$0.88

$0.90

$0.92

$0.94

$0.96

$0.98

$1.00

$1.02

Lead LME Monthly Average Price Per PoundJanuary 2014 To January 2015


12 Zinc

The market price for zinc on

the LME averaged $0.96 per

pound in January 2015,

declining from $0.99 the prior

month but remaining above the

January 2014 average of $0.92,

and is expected to continue

fluctuating in the short term.

According to the ILZSG, global

demand for refined zinc metal

increased 5.4% over the first 11

months of 2014, driven by

demand gains from China and the U.S. Global zinc mine output inched up 1.9%, while global refined zinc production

climbed 4.2% due to higher output in China. The ILZSG indicated the global zinc market was in deficit by 255,000

metric tons for the 11-month period and projects a deficit of 366,000 in 2015 as demand continues to rise due to

increased Chinese usage. However, Chinese zinc usage will fall during the upcoming Chinese New Year holiday, and

the market will feel pressure from growing imports. Despite major swings in LME pricing for zinc, scrap prices for

zinc have remained relatively stable against a backdrop of balanced supply and demand fundamentals. However, zinc

premiums are anticipated to climb in 2015, given mine shutdowns and lower investment.

The LME market price for copper averaged $2.64 per pound in January 2015, declining from $2.91 the prior month and

remaining below the January 2014 average of $3.31. Prices declined toward the end of 2014 in anticipation of a surplus

that failed to materialize, with the International Copper Study group revising its 2014 estimate to a deficit of 307,000

metric tons. The surplus is now expected to emerge in 2015 at a projected 450,000 metric tons, inciting talk of

production cutbacks and mine closures. In January 2015, LME copper stocks increased 23.5% from the prior month.

Although copper consumption remains strong and some believe the expected surplus is overblown, copper prices

declined in January and early February due to plunging oil prices, a stronger U.S. dollar, and the continued

sluggishness in the Chinese

economy. Chilean copper

commission Cochilco revised

its 2015 copper price forecast

down to an average of $2.85

per pound, with BMO Capital

Markets Corp. projecting a

price floor of $2.35 per

pound. Still, Cochilco

foresees a 2.6% boost in

global copper demand in

2015 due to strong medium-

and long-term fundamentals.

Copper

$0.90

$0.92

$0.94

$0.96

$0.98

$1.00

$1.02

$1.04

$1.06

Zinc LME Monthly Average Price Per PoundJanuary 2014 To January 2015

$2.60

$2.70

$2.80

$2.90

$3.00

$3.10

$3.20

$3.30

$3.40

Copper LME Monthly Average Price Per PoundJanuary 2014 To January 2015


13 Aluminum

Prices for P1020 primary aluminum ingot averaged

$1.06 per pound in January 2015, declining from $1.10

the prior month but remaining above the January 2014

average of $0.97.

In 2014, the rebounding automotive market aided

strong growth in distributors’ aluminum shipments,

which increased 8.1% from the prior year, according to

Metals Service Center Institute. While distributors and

service centers remained busy in December 2014 as

shipments climbed moderately, some had expected

even stronger results. AMM reported aluminum

inventories at U.S. service centers in December rose 1%

from the prior month and 8% from the prior year,

reflecting some room for demand improvement.

Still, LME stocks of aluminum declined throughout 2014

and into the new year. In January 2015, LME aluminum

stocks fell 3.6% from the prior month. Despite solid

market fundamentals, aluminum prices fell in recent

months due to the dramatic drop in oil prices, as well as

a strengthening U.S. dollar and slowing growth in the

global economy, which spooked traders into selling off

aluminum commodities on the LME.

In addition, Midwest aluminum premiums are poised to

fall in the near future, as consumers stocked up on

aluminum in the fourth quarter, premiums abroad have

weakened, and import competition is on the rise.

However, premiums will not actually decline until a

large transaction takes place and sets the tone for the

market.

Although the aluminum market started off 2015 on the

slow side, U.S. aluminum extruders anticipate record

shipments this year as demand surges from the North

American transportation market. One by one,

historically steel-based automotive components are

increasingly being substituted by lighter-weight

aluminum alternatives, with a recent spike in the

adoption of aluminum-framed bumpers. The continued

shift to aluminum components was aided by the

increasing favorability of lighter-weight vehicles, as

well as record vehicle sales in the U.S. Extruders have

particularly witnessed a significant uptick in interest

from manufacturers of passenger vehicles, as lighter-

weight vehicles enjoy enhanced fuel economy and are

able to support additional advanced emission control

systems, safety devices, and electronic systems.

$0.94

$0.96

$0.98

$1.00

$1.02

$1.04

$1.06

$1.08

$1.10

$1.12

$1.14

$1.16

$1.18

P1020 Primary Aluminum IngotDelivered U.S. Midwest

Monthly Average Price Per PoundJanuary 2014 To January 2015


14 Nickel

Nickel prices on the LME averaged

$6.70 per pound in January 2015,

down from $7.22 the prior month

but remaining above the January

2014 average of $6.39. Nickel

prices fluctuated in recent months,

with the current downward

pressure influenced by the drop in

oil prices. Demand for nickel-

containing pipe is set to fall as

petrochemical projects are pulled

back. Further cutbacks on capital

expenditures from the oil industry

could further hurt nickel pricing.

Although the majority of nickel is used in the production of stainless steel, which continues to maintain solid demand,

part of this demand is being diverted to lower-cost imports. The U.S. has recently been attracting more imports due to

the strengthening U.S. dollar and weakening Euro, which could cause stainless steel mills to cut back on production

and, in turn, reduce their nickel purchases. In January, nickel demand was strong enough to spur nickel consumers to

take advantage of lower market prices and buy more material. However, nickel trading remained relatively quiet.

In January 2015, the prices for grades 301 (7%), 304 (8%), and 316 stainless steel inched up to $1.29, $1.38, and $1.81 per

pound, respectively, versus $1.25, $1.34, and $1.77, respectively, the prior month due to higher nickel surcharges

resulting from increased nickel prices in December 2014. Stainless steel prices also remained above January 2014 prices.

In 2014, North American stainless steel operators enjoyed improved performance thanks to robust demand from the

energy, aerospace, transportation, and automotive end-markets, with multiple price hikes and a 7.3% increase in U.S.

distributor shipments for the first 10

months of 2014 versus 2013,

according to the Metals Service

Center Institute.

HSBC Bank forecasts global stainless

steel production will increase 4.0% in

2015. However, lower-cost imports

are hitting the market, weakening

domestic stainless steel pricing for

February. Import volumes may

decrease if domestic lead times

remain short and import offers

further approach domestic pricing.

Stainless Steel

$6.20

$6.40

$6.60

$6.80

$7.00

$7.20

$7.40

$7.60

$7.80

$8.00

$8.20

$8.40

$8.60

$8.80

$9.00

Nickel LME Monthly Average Price Per PoundJanuary 2014 To January 2015

$1.10

$1.20

$1.30

$1.40

$1.50

$1.60

$1.70

$1.80

$1.90

$2.00

$2.10

$2.20

Stainless Steel Flat Rolled CoilMonthly Average Base Selling Price Per Pound

Less Discounts, Including SurchargesJanuary 2014 To January 2015


15 Metals Reference Sheet

YEAR AGO NOVEMBER 2014 DECEMBER 2014 JANUARY 2015

AUTO SHRED $431/GT $332/GT $325/GT $332/GT

HMS (HEAVY MELT STEEL) $414/GT $322/GT $317/GT $324/GT

BUSHLING $437/GT $356/GT $351/GT $354/GT

CARBON FLAT ROLLED SHEET COIL BASE PRICE

YEAR AGO DECEMBER 2014 JANUARY 2015 NOVEMBER 2014

HOT BANDS $677/NT $609/NT $567/NT $636/NT

COLD ROLLED $790/NT $741/NT $707/NT $757/NT

HOT-DIPPED COATED GALVANIZED $882/NT $810/NT $775/NT $826/NT

CARBON STEEL PLATES BASE PRICE


PLATE COILS AND STRIP MILL COILS $660 - $685/NT $640 - $670/NT $620 - $658/NT $575 - $600/NT

DISCRETE

PLATES*

CARBON STEEL $772/NT $805/NT $775/NT $730/NT

ALLOYS PLATES $1,220/NT $1,175/NT $1,125/NT $1,080/NT

HOT ROLLED MERCHANT BAR (MBQ) SHAPES (NET OF DISCOUNTS AND REBATES)

YEAR AGO JANUARY 2015 NOVEMBER 2014 DECEMBER 2014

1/2” X 4” FLATS* $785 Avg/NT $810 Avg/NT $815 Avg/NT $815 Avg/NT

2” X 2” X 1/4” ANGLES* $785 Avg/NT $810 Avg/NT $815 Avg/NT $815 Avg/NT

REBAR COILS, GRADE 60:

#3 TO #5 SIZES $680 Avg/NT $650 Avg/NT $670 Avg/NT $670 Avg/NT

MERCHANT BAR

(FOB MIDWEST MILL) $755 - $785/NT $775 - $805/NT $725 - $755/NT $775 - $805/NT

*Variances include East to West Coast markets and variances in rebates.

*Depending on thickness limits and subject to grade extras up to $600/NT




ALUMINUM (LME VALUES) $0.7831/LB $0.9316/LB $0.8678/LB $0.8203/LB

ALUMINUM NA

(HIGH GRADE P1020) $0.9654/LB $1.1708/LB $1.1033/LB $1.0617/LB

MWTP

(MIDWEST PREMIUM) $0.1770/LB $0.2389/LB $0.2370/LB $0.2419/LB

ALUMINUM ALLOY A380.1,

LME VALUES $1.0330/LB $1.1100/LB $1.0850/LB $1.0680/LB

ALUMINUM


NICKEL, LME VALUES $6.3863/LB $7.1242/LB $7.2206/LB $6.7000/LB

COPPER HIGH GRADE A,

LME VALUES $3.3089/LB $3.0396/LB $2.9134/LB $2.6380/LB

NICKEL AND COPPER

YEAR AGO DECEMBER 2014 NOVEMBER 2014 JANUARY 2015

J55 ERW 4 1/2” TO 8 5/8” $1,150 - $1,170/NT $1,180 - $1,230/NT $1,180 - $1,230/NT $1,180 - $1,230/NT

LINE PIPE ERW 4” BLACK $920 - $930/NT $915 - $925/NT $915 - $925/NT $915 - $925/NT


HOT ROLLED 1000 1” $42.50/CWT

($850/NT)

$46.00/CWT

($920/NT)

$46.00/CWT

($920/NT)

$46.00/CWT

($920/NT)

HOT ROLLED 4100 1” $51.65/CWT

($1,033/NT)

$54.00/CWT

($1,080/NT)

$54.00/CWT

($1,080/NT)

$54.00/CWT

($1,080/NT)

COLD FINISHED C1018 1” $58.35/CWT

($1,167/NT)

$58.00/CWT

($1,160/NT)

$58.00/CWT

($1,160/NT)

$58.00/CWT

($1,160/NT)

OCTG AND LINE PIPE SAMPLING

SBQ BARS (INCLUDING SURCHARGES, NET OF REBATES)



(Product prices using current average distributor discount)

“0.044” X 48/60’ WIDE

X COIL YEAR AGO

NOVEMBER 2014

DELIVERY

DECEMBER 2014

DELIVERY

JANUARY 2015

DELIVERY

T304* $1.2652/LB $1.3977/LB $1.3374/LB $1.3766/LB

T316/316L* $1.6898/LB $1.8605/LB $1.7716/LB $1.8110/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 NOVEMBER 2014 JANUARY 2015 DECEMBER 2014

T304/304L $0.6492/LB $0.7817/LB $0.7606/LB $0.7214/LB

T316/316L $0.8918/LB $1.0625/LB $1.0130/LB $0.9736/LB

120,000

140,000

160,000

180,000

200,000

220,000

240,000

260,000

280,000

300,000

320,000

340,000

360,000

LME Copper Warehouse StocksMonthly Average Metric Tons

January 2014 Through January 2015

4,000,000

4,200,000

4,400,000

4,600,000

4,800,000

5,000,000

5,200,000

5,400,000

5,600,000

LME Aluminum Warehouse StocksMonthly Average Metric Tons

January 2014 Through January 2015


18 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 steel-

producing 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 $30

million to $1.1 billion, including the following sampling:

A master distributor of stainless steel products;

A processor of steel and electrical steel;

A contract processor of flat rolled steel;

A manufacturer of steel-based construction products;

A fabricator of architectural aluminum products;

A manufacturer of metal-based boiler systems;

A manufacturer of metal industrial rack systems;

A manufacturer of metal roofing products;

A manufacturer of metal-based industrial fasteners;

A manufacturer of ductile and gray iron castings;

A processor and service center for flat rolled steel; and

A leading recycler of ferrous and non-ferrous metals.

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.

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.

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.


19 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

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.

We do not guarantee the completeness of such information or make any representation as to

its accuracy.


20 Appraisal & Valuation Team

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 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. GA also offers various industry monitors

via its subsidiary, GA Europe Valuations Limited. For more information, please visit www.greatamerican.com.

Great American Group, LLC is a wholly owned subsidiary of B. Riley Financial, Inc. (OTCBB: RILY), which provides

collaborative financial services and solutions 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, a leading provider of advisory and valuation services, asset disposition and auction

solutions, and commercial lending services; B. Riley Asset Management, LLC, a provider of investment products to

institutional and high net worth investors; and MK Capital Advisors, LLC, a multi-family office practice and wealth

management firm focused on the needs of ultra-high net worth individuals and families.

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 www.brileyfin.com.

Headquarters

21860 Burbank Blvd. Suite 300 South

Woodland Hills, CA 91367 800-45-GREAT www.greatamerican.com

Mike Marchlik

National Sales & Marketing Director

[email protected]

(818) 746-9306

David Seiden

Executive Vice President, Southeast Region

[email protected]

(770) 551-8114

Ryan Mulcunry

Executive Vice President - Northeast Region, Canada & Europe

[email protected]

(617) 692-8310

Bill Soncini

Senior Vice President, Midwest Region

[email protected]

(312) 777-7945

Drew Jakubek

Managing Director, Southwest Region

[email protected]

(972) 265-7981

Jennie Kim

Vice President, Western Region

[email protected]

(818) 746-9370

Ken Bloore

Chief Operating Officer

[email protected]

(818) 884-3737

Michael Petruski

Executive Vice President, General Manager

[email protected]

(818) 884-3737

Greg Trilevsky

Senior Appraiser—Metals and Manufacturing

[email protected]

(909) 559-8135

Alex Tereszcuk


[email protected]

(336) 854-7859

Dan Tracy


[email protected]

(412) 953-6357

John Little

Senior Appraiser—Scrap Recycling

[email protected]

(864) 630-4799

Ryan Lutz

Senior Project Manager—Metals Specialist

[email protected]

(781) 429-4052

Daniel Williams

Managing Director, New York Region

[email protected]

(646) 381-9221

http://www.greatamerican.com

http://brileyfin.com/

mailto:[email protected]

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