Metals Monitor - Great American X V W Z — Metals Monitor Z Recent Appraisal Trends Z...
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1 September 2014 Metals Monitor
1 September 2014 Metals Monitor
1 Trend Tracker
Ferrous: NOLVs remained relatively
consistent due to minimal pricing volatility
over the past six months.
Non-ferrous: NOLVs increased due to price
increases for aluminum, lead, zinc, and nickel
in the summer months.
Ferrous: Sales were mixed due to higher
prices for some products and flat to lower sales
Non-ferrous: Sales were mixed due to higher
prices for aluminum, nickel, and stainless steel,
as well as fluctuations in copper price trends.
Ferrous: Gross margins increased due to price
Non-ferrous: Gross margins were mixed due
to a tight spread between prime aluminum and
scrap pricing, higher margins for nickel and
stainless steel due to price increases, and
volatile copper margins.
Ferrous: Inventory levels remained consistent,
as the seasonal summer slowdown inhibited
speculative buying and stocking.
Non-ferrous: Inventory levels remained
consistent as companies managed inventory
levels relative to price fluctuations.
Ferrous: Prices were consistent, as
fluctuations in scrap pricing remained within a
range of $10 per gross ton over the past four
months, reducing the pricing pressure placed
on downstream products.
Non-ferrous: Pricing increased due to price
increases for aluminum, lead, zinc, nickel, and
stainless steel, with volatile prices for copper.
Ferrous Metal Non-Ferrous Metal
2 September 2014 Metals Monitor
Over the summer, the demand outlook for steel brightened
slightly, although the steel market remains clouded by excess
capacity and economic uncertainty. Meanwhile, supply
pressures boosted prices for many base metals in recent months.
In the U.S., prices for flat rolled coil and rebar
slipped in June amid the seasonal summer
slowdown. Hot rolled coil prices recovered in
July, joined by cold rolled coil prices in
August, while rebar prices held firm. Plate
pricing, meanwhile, continued its steady
ascent. Steel buyers demonstrated healthy
demand despite a high level of imports.
However, shifts in the economic or political
landscape, as well as the announced addition
of steel capacity through 2020, could pose a
threat to the domestic steel market.
Base metals have experienced tightness in the
physical markets due to supply and demand
factors, lifting prices for aluminum, zinc, and
lead more than expected.
The elevation in prices may be short-lived,
however, as the volumes of metals held in
and out of official exchange warehouses
distort the physical markets. In addition,
demand remains tepid, and supplies of base
metal scrap are readily available, with the
exception of stainless steel scrap.
3 September 2014 Metals Monitor
The automotive industry is a significant consumer of steel
and aluminum. Auto sales climbed throughout the
summer, buoyed by a perfect storm of seasonal incentives,
higher demand for trucks and SUVs, easier accessibility to
credit, new product offerings, lower gas prices, and
improvement in the economy.
In August 2014, overall auto sales increased 5.5% year-
over-year, with one less selling day to boot. Moreover, the
industrys annualized selling rate reached 17.5 million
vehicles, according to Autodata, marking the highest level
in nearly eight years and returning the industry to pre-
recession levels. Of the Big Three Detroit automakers,
Chrysler Group LLC posted the best results, with a 20%
sales increase in August. Meanwhile, Ford Motor
Company experienced flat year-over-year sales, while
General Motors Companys sales slipped 1%. Asian
automakers fared better, with most registering sales
increases. Analysts are optimistic auto sales will continue
to grow at a healthy pace through the end of 2014.
The Institute for Supply Managements purchasing
managers index (PMI), an indicator for manufacturing
activity, has generally increased in recent months. The
PMI rose 1.9 points from 57.1 in July to 59.0 in August,
marking the highest reading in the last year, while the
lowest reading of 51.3 was registered in January.
A reading above 50 indicates the manufacturing economy
is generally expanding, while a reading below 50 reflects
general contraction. The manufacturing sector has
expanded for the 15th consecutive month. A PMI above
42.2 over a period of time typically denotes an expansion
of the overall economy. The August PMI therefore
demonstrated growth in the overall economy for the 63rd
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.
U.S. rig counts have increased over the past year, with
year-over-year gains for the vast majority of weekly
counts. Canadian rig counts have been more volatile,
although they have also mostly increased year-over-year.
As of September 5, 2014, the U.S. rig count totaled 1,925
rigs drilling for oil or gas, increasing by 11 rigs from the
prior week and up by 158 rigs from the same week in
2013. Although demand is strong for both crude oil and
natural gas, the number of oil rigs has increased in recent
years, while the number of natural gas rigs has been
falling since mid-2011 due to efficient drilling methods
that require fewer rigs for the same amount of
productivity. In addition, oil prices have remained above
the $90 per barrel throughout 2014 to date, supporting oil
drilling and a high oil rig count.
Month Seasonally Adjusted PMI
August 2014 59.0
January 2014 51.3
December 2013 56.5
August 2013 56.3
September 5, 2014 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)
December 6, 2013 1,775 (25) 402 (4)
November 1 1,742 (58) 394 11
October 4 1,756 (81) 361 (11)
September 6 2013 1,767 (97) 389 44
4 September 2014 Metals Monitor
4 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
remained relatively consistent due to minimal
pricing volatility over the past six months. NOLVs
for non-ferrous metals increased, as supply-side
pressure drove up pricing for aluminum, lead, zinc,
and nickel throughout the summer months, while
other base metal prices were fairly volatile.
Sales of ferrous inventory were mixed, with no major
shift in demand for downstream products. Higher
prices this year versus last year helped stabilize
dollar sales trends, while sales volumes remained flat
to down. A number of companies expect demand
increases from the construction market in the third
quarter. Sales of non-ferrous inventory were also
mixed, as increases in aluminum, nickel, and
stainless steel pricing drove up dollar sales trends for
these metals versus last year, while copper sales
trends continue to fluctuate with pricing. However,
there were no major changes in sales volume trends.
Gross margins increased for ferrous metals as a result
of continued price stabilization, allowing mills and
distributors to rely on stable inventory costs and
maintain margins. Gross margin trends for non-
ferrous metals were mixed due to global pressures.
Continued increases in aluminum prices have
allowed companies to boost selling prices, but a tight
spread between prime aluminum and scrap pricing
has hindered gains in margin. Meanwhile, nickel
and stainless steel margins have gained steam from
price increases, while copper margins remain
Inventory levels for ferrous metals were consistent,
as the seasonal summer slowdown