PNC METALS INDUSTRY UPDATE

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1 FIRST QUARTER 2018 PNC METALS INDUSTRY UPDATE IN THIS ISSUE GDP Growth Supports Shipments and Pricing 1 Pricing Momentum Builds 4 Pricing for Public Notes and Bonds 5 Syndicated Bank Loan Financing 7 Equity Analysis 8 FOR MORE INFORMATION Contact the PNC Metals Group: David B. Gookin Executive Vice President Metals Group Diversified Ind. PNC Financial Services Group One North Franklin Street Suite 2500 Chicago, Illinois Phone: Cell: david.gookin@pnc.com Alexander D. Mack Vice President Metals Group Diversified Ind. PNC Financial Services Group The Tower at PNC Plaza 300 Fifth Avenue Pittsburgh, Pennsylvania Phone: Cell: alex.mack@pnc.com Welcome to Issue #19 of the PNC Metals Industry Update. We are pleased to introduce Bill Adams, Senior International Economist for PNC, as the new author of our semiannual PNC Metals Economic Report. Bill brings a global view to economic issues and will be a great addition to our Update. This issue will feature the Metals Economic Report. Following that will be our recurring sections on metal prices, public notes and bonds, and syndicated bank loans. Finally, we will take a look at how the major public metal equities performed during We continue to be bullish entering 2018, but the only thing that will be a surprise for the coming year will be if we don t have any surprises. FASTER REAL GDP GROWTH TO SUPPORT STEEL SHIPMENTS AND STABLE PRICES IN 2018 Summary U.S. real GDP growth will pick up to 2.7% in 2018 from 2.3% in 2017, a tailwind to steel demand. The outlook for construction and business capex is upbeat, while auto sales growth prospects are more modest. U.S. producers share of the domestic market is likely to hold stable in 2018, as are steel prices. The backdrop for American steel is favorable in 2018 (see chart 1). The tax cuts enacted for 2018 are boosting stock prices and disposable incomes, and a tighter labor market is supporting wage gains. Collectively, these developments are supportive of another solid increase in consumer spending in Business capex, energy production and exports are also improving, supported by higher oil prices and a weaker U.S. dollar. PNC s Economics Department forecasts for these growth drivers to lift U.S. real GDP growth to 2.7% in 2018 from 2.3% in This upbeat outlook extends to the sectors driving steel demand. PNC s Economics Department forecasts solid construction growth in 2018, fueled by a 2.9% increase in real investment in residential and nonresidential structures (see chart 2) will mark a second consecutive year of near 3% growth in this sector, which purchases over 40% of domestic steel shipments. Investment in nonresidential structures is set to grow 3.5% in 2018, outpacing the 2.4% growth of investment in residential structures. Residential construction faces bottlenecks from shortages of construction workers and of buildable land in major metropolitan areas.

2 PNC METALS INDUSTRY UPDATE 2 FASTER REAL GDP GROWTH TO SUPPORT STEEL SHIPMENTS AND STABLE PRICES IN 2018 (Continued) Businesses investment in capital equipment is also expected to grow a solid 4.5% in 2018, with the energy sector a notably bright spot. The Energy Information Agency s weekly estimate of domestic crude production in December 2017 reached the highest level since comparable data began in 1983, and Baker Hughes tally of oil-drilling rigs operating in North America jumped 39% from a year earlier in January The outlook for auto-manufacturing demand is more mixed. PNC s Economics Department cautiously forecasts only 1.0% growth in vehicle sales in 2018, restrained by higher interest rates and more stringent underwriting of auto loans (the Federal Reserve s senior loan officer survey shows underwriting standards tightening since the second half of 2016). After a 1.6% drop in sales in 2017, 2018 s auto sales will likely undershoot 2016 s record. On balance, U.S. steel demand will likely grow % in An infrastructure spending plan seems possible but unlikely; if enacted, steel demand growth could substantially overshoot our forecast. U.S. producers market share is likely to hold stable in 2018 (see chart 5). Imports gained market share during spring and summer 2017 after the domestic steel price premium widened in the first quarter of the year (see chart 6). But global prices subsequently rose, the domestic price premium narrowed in the rest of 2017, and the foreign share of the U.S. market retreated. In 2018, several factors should support foreign steel prices: Prices of foreign oil are higher after the premium for Brent crude above the domestic U.S. benchmark WTI widened in Global economic growth is broadbased (again, see chart 1). And in particular, manufacturing output is strong in most global economies. The consensus of economic forecasters predicts U.S. steel prices will hold mostly stable in 2018 from 2017, as do financial futures markets. Steel prices could rise if the U.S. government imposes new tariffs on imports the Commerce Department submitted its Section 232 investigation of steel imports effect on national security to the White House on January 11, giving President Trump 90 days to act on its findings (China is the world s largest net exporter of steel, but most U.S. steel imports are from close allies, complicating any effort to protect domestic producers). Opposition from domestic steel consumers, and the risk of allies retaliating against U.S. exports or reducing strategic cooperation against geopolitical threats, will likely dissuade the U.S. government from changing the trade status quo.

3 PNC METALS INDUSTRY UPDATE 3 FASTER REAL GDP GROWTH TO SUPPORT STEEL SHIPMENTS AND STABLE PRICES IN 2018 (Continued) Chart 1: The global expansion is broadening 8% Annual Real GDP Growth, % 2016 Actual 2017 Preliminary 6% 2018 Forecast 4% 2% 0% Chart 2: The outlook for construction & capex is bright $1,400 $1,200 $1,000 $800 $600 $400 Residential and non-residential structures Equipment Forecast Forecast -2% -4% Sources: BEA, Eurostat, NBS, Japan Statistical Bureau, IBGE, PNC Economics baseline forecasts USA EU China Japan Brazil World $200 Real fixed capital spending, billions of US $, 2009 prices $0 Sources: BEA, Moody's Analytics, PNC Economics forecasts Jan-00 Jan-03 Jan-06 Jan-09 Jan-12 Jan-15 Jan-18 Jan-21 Chart 3: Auto sales face modest growth prospects Chart 4: 4: Higher capacity utilization can continue 20 Autos and light truck sales, millions, annual rate 85% 85% Steel Steel Capacity Utilization Rate, Rate, % % 18 80% 80% 16 Forecast 75% 75% United United States States % 70% 10 65% 65% World World Sources: Moody's Analytics, PNC Economics baseline forecast 8 Jan-01 Jan-05 Jan-09 Jan-13 Jan-17 Sources: AISI, AISI, WSA, WSA, Bloomberg 60% 60% Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Chart 5: Steel imports gained market share in 2017 Chart 6: Forecasters and futures predict flat steel prices 40% 30% Steel imports, share of domestic market, % $800 $600 USA W. Europe Hot rolled band, $ per MT Futures pricing Consensus forecast 20% 10% $400 $200 China Sources: Steel Benchmarker, Bloomberg, PNC Economics' calculations Source: American Iron and Steel Institute Steel Imports Monitoring and Analysis (SIMA) data 0% Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Premium, US price vs world export price $0 Jan 14 Jan 15 Jan 16 Jan 17 Jan 18 Jan 19 Visit pnc.com/economicreports to view the full listing of economic reports published by PNC s economists. Disclaimer: The material presented is of a general nature and does not constitute the provision of investment or economic advice to any person, or a recommendation to buy or sell any security or adopt any investment strategy. Opinions and forecasts expressed herein are subject to change without notice. Relevant information was obtained from sources deemed reliable. Such information is not guaranteed as to its accuracy. You should seek the advice of an investment professional to tailor a financial plan to your particular needs The PNC Financial Services Group.

4 PNC METALS INDUSTRY UPDATE 4 PRICING MOMENTUM BUILDS DURING THE QUARTER Prices for the fourth quarter remained generally steady across the 19 products tracked in this section. Percentage price movements were pretty small with 10 increases, four declines and five flat. An exception was ferrous scrap prices, which were up about $30 per ton. The producers of flat roll products were able to pass the scrap price increase plus an extra $10 along to their customers. However, the other carbon products absorbed most of the scrap increase. In the case of SBQ, prices for the small diameter product actually declined. Pricing momentum did seem to pick up during the quarter, and all indications are for higher prices across most products during Q METALS PRICING Carbon Flat-Rolled Steel $/NT Product October November December Hot-Rolled Cold-Rolled Galvanized Discrete Plate $/NT Product October November December A A AR Wide Flange Beam $/cwt. Size October November December 24"x12¾" "x6" MBQ $/cwt. Shape October November December 1" 1018 round Rebar $/cwt. Grade 60 Size October November December 16 mm - # SBQ $/cwt. 1 round Grade October November December HR 4140 Q&T Pipe & Tube $/NT Product October November December OCTG J55 1,050 1,050 1,050 Linepipe, ERW Aluminum $/lb Alloy October November December Stainless $/lb Cold-Rolled Coil Grade October November December Copper $/lb October November December Comex Avg Ferrous Scrap Prices $/GT Midwest Grade October November December No. 1 HMS Shredded Nickel $/lb October November December LME Avg The metals market price guide is courtesy of Sector3 Appraisals, Inc., provider of asset valuation and advisory services for ABL lenders, specializing in metals, chemicals and commodities. For more information, contact: Michael Dawson Editor, Market Research mdawson@sector3appraisals.com

5 PNC METALS INDUSTRY UPDATE 5 PRICING FOR PUBLIC NOTES AND BONDS Q4 ACTIVE WITH EQUITY ISSUES More than $2.4 billion in capital was raised during the quarter. It was a particularly busy quarter for equity: Stelco Holdings completed its IPO by selling $230 million in common shares, ATI raised more than $400 million to prefund 2019 Senior Notes, and Constellium raised more than $275 million to fund part of a tender offer for senior secured notes. These equity issues totaled more than $913 million, particularly after consideration for the underwriters increase option. Also, Constellium issued senior unsecured notes as the remaining part of its tender funding. Finally, Cleveland Cliffs raised $675 million in senior secured notes and convertible senior notes to finance the new HBI plant. NEW NOTE ISSUE PRICING Issuer Amount Type Coupon Maturity Constellium $500,000,000 Sr Unsecured 5.875% 2026 Constellium EUR 400,000,000 Sr Unsecured 4.250% 2026 Cleveland Cliffs $275,000,000 Sr Convertible 1.5% 2025 Cleveland Cliffs Sr Secured 4.875% 2024 During the quarter, both IG and HY Indexes reported the tightest spread to treasuries since we initiated our Metals Bond Index in July of The IG Index spread is 113 bps. The HY Index spread of bps is just a fraction of its 1/15/2016 peak of 1,936 bps and only offers a 124 basis point premium to the IG Index spread. Some of the relative spread compression has come from changes in the effective maturities of each index, but it is still an interesting statement on the risk perception of investors. METALS BOND INDEX* PNC IG Metals Bond Index PNC HY Metals Bond Index As of Date 1/12/ /13/2017 Change 1/12/ /13/2017 Change Members Effective Maturity (Years) Composite Rating BBB BBB+ -1 BB- BB- 1 Weighted Avg. Coupon 4.91% 4.62% 0.29% 6.58% 6.67% -0.09% Yield to Worst 3.47% 3.09% 0.38% 4.69% 5.05% -0.36% Option Adjusted Spread to Treasuries (bps) *Index members are market-value weighted. Source: Bloomberg

6 PNC METALS INDUSTRY UPDATE 6 METALS BOND UPDATE 1/12/2018 Issuance Date Issuer Amount Outstanding ($MM) Structure Moody's Rating S&P Rating Maturity Coupon Rate Price at Issuance Issuance Spread over Treasury Yield to Worst Interp. Spread (G-Spread) 7/14 Interp. Spread Δ in Spread (bps) %Δ in Spread Steel Mills 9/16/2014 AK Steel Corp $406.2 Sr Unsecured B3 B- 10/1/ % bps 2.640% 195 bps 338 bps -143 bps -42.2% 6/20/2016 AK Steel Corp $ st lien B1 BB- 7/15/ % bps 4.115% 230 bps 268 bps -38 bps -14.0% 6/1/2015 ArcelorMittal $324.2 Sr Unsecured Ba1 BB+ 6/1/ % bps 2.997% 101 bps 92 bps 9 bps 9.9% 2/28/2012 ArcelorMittal $659.2 Sr Unsecured Ba1 BB+ 2/25/ % bps 3.636% 144 bps 135 bps 9 bps 6.7% 6/1/2015 ArcelorMittal $500.0 Sr Unsecured Ba1 BB+ 6/1/ % bps 3.749% 129 bps 167 bps -38 bps -22.7% 3/7/2011 ArcelorMittal $629.0 Sr Unsecured Ba1 BB+ 3/1/ % bps 5.156% 245 bps 330 bps -86 bps -25.9% 5/20/2013 Commercial Metals Co $330.0 Sr Unsecured Ba2 /*- BB+ /*- 5/15/ % bps 4.179% 189 bps 194 bps -4 bps -2.3% 4/29/2014 GTL Trade Finance Inc / Gerdau Holdin $1,165.6 Sr Unsecured Ba2 BBB- 4/29/ % n/a 4.283% 188 bps 244 bps -56 bps -23.1% 4/16/2014 GTL Trade Finance Inc $500.0 Sr Unsecured Ba2 BBB- 4/16/ % bps 6.107% 333 bps 394 bps -61 bps -15.5% 6/2/2008 Nucor Corp $500.0 Sr Unsecured Baa1 A- 6/1/ % bps 2.116% 63 bps 77 bps -14 bps -18.6% 9/21/2010 Nucor Corp $600.0 Sr Unsecured Baa1 A- 9/15/ % bps 2.756% 51 bps 67 bps -16 bps -23.5% 7/29/2013 Nucor Corp $500.0 Sr Unsecured Baa1 A- 8/1/ % bps 2.972% 64 bps 84 bps -20 bps -23.8% 12/3/2007 Nucor Corp $650.0 Sr Unsecured Baa1 A- 12/1/ % bps 3.981% 133 bps 165 bps -33 bps -19.7% 7/29/2013 Nucor Corp $500.0 Sr Unsecured Baa1 A- 8/1/ % bps 3.916% 118 bps 144 bps -26 bps -18.1% 9/9/2014 Steel Dynamics Inc $500.0 Sr Unsecured Ba1 BB+ 10/1/ % bps 3.153% 133 bps 132 bps 2 bps 1.3% 3/19/2010 United States Steel Corp $431.8 Sr Unsecured Caa1 B 4/1/ % bps 3.415% 143 bps 188 bps -45 bps -23.8% 5/10/2016 United States Steel Corp $ st lien B1 BB- 7/1/ % bps 3.446% 212 bps 175 bps 36 bps 20.7% 5/21/2007 United States Steel Corp $350.0 Sr Unsecured Caa1 B 6/1/ % bps 6.725% 407 bps 452 bps -45 bps -9.9% Distribution 4/12/2013 Reliance Steel & Aluminum Co $500.0 Sr Unsecured Baa3 BBB 4/15/ % bps 3.365% 105 bps 116 bps -12 bps -10.1% 11/20/2006 Reliance Steel & Aluminum Co $250.0 Sr Unsecured Baa3 BBB 11/15/ % bps 5.137% 251 bps 275 bps -25 bps -8.9% 5/24/2016 Joseph T Ryerson & Son Inc $ st lien Caa1 B 5/15/ % bps 5.001% 341 bps 487 bps -147 bps -30.1% 4/13/2010 Worthington Industries Inc $150.0 Sr Unsecured Baa3 BBB 4/15/ % bps 2.719% 80 bps 102 bps -21 bps -20.8% 4/15/2014 Worthington Industries Inc $250.0 Sr Unsecured Baa3 BBB 4/15/ % bps 3.917% 148 bps 175 bps -27 bps -15.6% Specialty 2/23/2007 Arconic Inc $500.0 Sr Unsecured Ba2 BBB- 2/23/ % n/a n/a 2.563% 80 bps 82 bps -2 bps -2.2% 4/21/2011 Arconic Inc $1,250.0 Sr Unsecured Ba2 BBB- 4/15/ % bps 3.147% 106 bps 137 bps -31 bps -22.9% 2/23/2007 Arconic Inc $627.2 Sr Unsecured Ba2 BBB- 2/23/ % n/a n/a 3.594% 138 bps 174 bps -35 bps -20.3% 1/25/2007 Arconic Inc $625.0 Sr Unsecured Ba2 BBB- 2/1/ % bps 5.131% 247 bps 293 bps -46 bps -15.7% 9/27/2016 Alcoa Nederland Holding BV $750.0 Sr Unsecured Ba2 BB 9/30/ % bps 3.979% 216 bps 174 bps 41 bps 23.8% 9/22/2014 Arconic Inc $1,250.0 Sr Unsecured Ba2 BBB- 10/1/ % bps 3.857% 147 bps 187 bps -40 bps -21.4% 9/27/2016 Alcoa Nederland Holding BV $500.0 Sr Unsecured Ba2 BB 9/30/ % bps 4.142% 199 bps 209 bps -9 bps -4.5% 7/12/2013 Allegheny Technologies Inc $500.0 Sr Unsecured B3 B 8/15/ % bps 6.072% 372 bps 387 bps -14 bps -3.6% 6/30/2011 Carpenter Technology Corp $250.0 Sr Unsecured Ba2 BBB- 7/15/ % bps 3.775% 168 bps 207 bps -39 bps -18.9% 2/26/2013 Carpenter Technology Corp $300.0 Sr Unsecured Ba2 BBB- 3/1/ % bps 4.055% 180 bps 188 bps -8 bps -4.3% 6/10/2015 Precision Castparts Corp $550.0 Sr Unsecured A2 AA- 6/15/ % bps 2.216% 19 bps 29 bps -10 bps -35.1% 12/20/2012 Precision Castparts Corp $1,000.0 Sr Unsecured A2 AA- 1/15/ % bps 2.642% 32 bps 44 bps -11 bps -25.9% 6/10/2015 Precision Castparts Corp $850.0 Sr Unsecured A2 AA- 6/15/ % bps 2.949% 48 bps 67 bps -19 bps -28.9% 6/10/2015 Precision Castparts Corp $275.0 Sr Unsecured A2 AA- 6/15/ % bps 3.661% 103 bps 129 bps -25 bps -19.8% 12/20/2012 Precision Castparts Corp $500.0 Sr Unsecured A2 AA- 1/15/ % bps 3.690% 94 bps 112 bps -18 bps -16.1% 6/10/2015 Precision Castparts Corp $325.0 Sr Unsecured A2 AA- 6/15/ % bps 3.680% 90 bps 108 bps -18 bps -16.5% 6/3/2014 Triumph Group Inc $300.0 Sr Unsecured B3 B- 6/1/ % bps 5.542% 333 bps 370 bps -37 bps -10.0% Pipe & Tube 8/29/2016 Novelis Corp $1,150.0 Sr Unsecured B2 B 8/15/ % bps 4.869% 259 bps 285 bps -25 bps -8.9% 9/14/2016 Novelis Corp $1,500.0 Sr Unsecured B2 B 9/30/ % bps 5.351% 294 bps 308 bps -14 bps -4.6% 6/14/2016 Zekelman Industries Inc $375.0 Secured Caa1 B 6/15/ % bps 4.037% 223 bps 327 bps -103 bps -31.6% Suppliers 11/20/2012 GrafTech International Ltd $300.0 Sr Unsecured B3 B 11/15/ % bps 5.931% 463 bps 591 bps -128 bps -21.6% Source: Bloomberg *+/*- Indicates ratings currently on review for upgrade/downgrade

7 PNC METALS INDUSTRY UPDATE 7 SYNDICATED BANK LOAN FINANCING The syndicated bank loan market limped to the finish line for Based upon activity reported to Reuters, there were just four new deals during the quarter for a total of $1.07 billion. That brings total volume for 2017 to $15.68 billion, which is up 22% from total volume level during 2016, but still well behind the total of $17.4 billion reported during Below are additional details for the activity in Q4. Sources: LPC Loanconnector, S&P, Moody s

8 PNC METALS INDUSTRY UPDATE 8 EQUITY ANALYSIS METALS COHORT RETURNS TO EARTH After providing returns of nine times the S&P in 2016, metals equities performed more in line with the major indexes during The average appreciation of the metals stocks in the Metals Cohort was 20% compared to the S&P of 20.41%, Basic Materials of 25% and the DOW of 25.41%. Specialty Metals led the group after being the weakest performing group in The other three groups all underperformed their results during Of the 29 names included in the Metals Cohort, winners exceeded losers by a margin of almost 3 to 1 (21 to 8). The newsletter you read was prepared for general information purposes only and is not intended as legal, tax or accounting advice or as recommendations to engage in any specific transaction, including with respect to any securities of PNC, and does not purport to be comprehensive. Under no circumstances should any information contained in this newsletter be used or considered as an offer or commitment, or a solicitation of an offer or commitment, to participate in any particular transaction or strategy. Any reliance upon any such information is solely and exclusively at your own risk. Please consult your own counsel, accountant or other advisor regarding your specific situation. Neither PNC Bank nor any other subsidiary of The PNC Financial Services Group, Inc. will be responsible for any consequences of reliance upon any opinion or statement contained here, or any omission. The opinions expressed in this newsletter are not necessarily the opinions of PNC Bank or any of its affiliates, directors, officers or employees. PNC is a registered mark of The PNC Financial Services Group, Inc. ( PNC ) The PNC Financial Services Group, Inc. All rights reserved. CIB CB PDF