Vol. 6, No. 10 Oct. 21, 2015 Industry Surveys of Factors Affecting the Upcoming November Market

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1 Vol. 6, No. 1 Oct. 21, 215 Industry Surveys of Factors Affecting the Upcoming November Market November market could sink again as demand falls The debate in the ferrous scrap market heading into November is not whether prices will fall yet again, but rather if the scrap market will reach its bottom next month. After an October in which prices fell hard, expectations are that November will see another decline. In fact, less than two percent of all respondents say they believe prices might go up. This is due in large part to a continuing decline in export demand and an expected large drop in mill demand for scrap. If there is any silver lining from respondents to the November Scrap Trends Outlook survey, it is that they believe prices will begin to rebound at the beginning of 216. Demand for scrap is expected to be down seriously among mills and brokers in November. With the exception of the prime grades, scrap is in a supply-anddemand balance right now, so any loss in demand is expected to drive prices down. These declines could be followed by a weaker December, most survey respondents say, although they expect the next six months to offer some relief for sellers. As for next month, purchasers and sellers of scrap are in near identical agreement about the anticipated market weaknesses. November Trend Indicator:.1 (Bearish) 5 Key Indicators for November 25. (Mill production) Output should be down in the coming weeks 38.1 (Broker demand) Buyers are not looking for much ferrous scrap 38.3 (Export demand) Foreign purchasers are still primarily pulling back from the market, removing a potential destination for unsold materials 41.6 (Mill inventory) Scrap on the ground will help diminish market need 56.6 (Local scrap) Local supplies will be low, but it may not matter Methodology: A numerical value is given to the overall trend for the upcoming month after all the survey results of a series of 15 indexes (please see pages 4 and 5) are calculated based on a weighted average. A number close to will give a sideways or unchanged reading, while numbers above will give a reading for a bullish trend. The closer to 1, the more likely it is that prices will trend upward. Conversely, a number below will give a reading for a bearish trend. The closer to, the more likely it is that prices will trend downward. N/A means there were too few survey responses to publish a reliable figure. Numbers & Letters Prices are just as likely to fall in a November as they are to rise. Prices have fallen across the board in five of the past 1 November markets. They did rise in 212 and 213 before falling last year. When prices do fall in November they do not tend to the extremes; most decreases over the past decade have been within 1 percent, with the exception of 28. Historical Trends A quick look at key points expected to affect next month s markets The Scrap Trends Outlook indicator number on average for mill factors, which take into account anticipated mill scrap demand plus expected levels of production, orders, mill inventory, home scrap levels and any slowdowns or shutdowns. All of these point to a severe decrease in the need for scrap among buyers in the market, undercutting prices. The percentage of respondents in this month s survey who expect prices to fall. An additional 26 percent say prices could be sideways or soft sideways next month. Prime and shredded grades lead the way in expected market declines, with foundry grades also expecting to be weaker. That leaves only 2 percent of respondents looking for an increase. How the market has performed in the past and what it may say about the coming month. Date No. 1 heavy melting No. 1 dealer bundles Shredded No. 1 busheling October 212 $34.17 $ $ $ November 212 $347. $ $ $377. October 213 $ $ $ $397. November 213 $3.83 $7. $ $42.83 October 214 $342. $ $ $ November 214 $312. $ $ $362. October 215 $152. $172. $ $ November Outlook Bearish Bearish Bearish Bearish Source: Scrap Price Bulletin. Scrap Trends Outlook October 215

2 Scrap Trends Outlook October 21, Trends & News by Scrap Grade A quick take on views, attitudes and patterns that affect the most-traded families of scrap PRIME CUT FRAG FOUNDRY Includes Busheling, Bundles, Clips. Includes No. 1 and No. 2 Heavy Melting, P&S. Includes Shredded, Other Fragmented Materials. Includes Cast Iron, Machinery Casts, Unstripped Motor Blocks. After dropping last month by significant numbers, prime grades are expected to decline in November, according to the survey. Both No. 1 busheling and No. 1 dealer bundles are available right now. Combined with an expected drop in demand, this is all but certain to push prices down next month, respondents say. Cut grades saw some big drops last month, but they were less severe than other scrap. Supplies were adequate but demand was down. Not much is expected to change in November. Both No. 1 and No. 2 heavy melting are expected to be down, as are the P&S grades, according to the survey, all hurt by a lack of exports. Shredded scrap is expected to be weak in November, following deep October decreases, according to respondents. Supplies are adequate to meet mill demand. However, Turkey has not re-entered the export market seeking frag, and this may contribute to a larger decline. Fully 77 percent of respondents say frag will fall next month. The smallest losses on a percentage basis in the October market were among the foundry grades. They are expected to drop again in November, and this time they are expected to perform worse than other grades, the survey says. These grades are expected to be down in all regions, and significantly so across the board. By the Numbers Scrap Trends Outlook Index numbers broken out by grade. Numbers above are bullish; below bearish. PRIME CUT FRAG FOUNDRY Bearish (31.) Bearish (33.4) Bearish (31.6) Bearish (32.1) Bearish (28.5) Bearish (3.) Bearish (28.9) Bearish (29.4) Bearish (26.2) Bearish (29.6) Bearish (28.1) Bearish (29.) Bearish (28.3) Bearish (32.) Bearish (3.9) Bearish (3.3) Taking Account A look at how Scrap Trends Outlook Index numbers for August stacked up against actual changes in last month s market. PRIME CUT FRAG FOUNDRY Bearish (39.3) Bearish (36.) Bearish (37.4) Bearish (36.7) Busheling: - $52/22% No. 1 HM: - $47/23% Shred: - $/22% Punchings: - $/11% Bundles: - $52/23% P&S: - $48/22% Misc. Foundry: - $48/14%

3 Scrap Trends Outlook October 21, Things to Watch in November Export is expected to be weaker, especially from Turkey, but also with a downward push from Asia Prices fell more on purchases made deeper into October, a potential sign of lower values heading into November Economic uncertainty in the United States continues Holiday slowdowns could further diminish mill output Supply still slightly outweighs demand in most regions Inventories of available prime scrap could weaken Various global crises could trigger problems overseas Service center inventories are not good for orders Anemic production follows steel orders as they hit a lull Mill raw steel capacity rates continue to stagnate Notable Quotes about Next Month (Selected comments from participants in this month s market survey) Mill scrap demand is lower and will only get worse. We won t hit the bottom until we see signs of improvement in steel order books and production. Scrap prices appear headed for another leg down as mill demand softens further in November. Destocking throughout the supply chain persists, leaving inventories. These prices are stupid low. We are at a point where our customers have to pay us to remove their scrap. On the retail side those that make their living scrapping are working twice as hard and are the main supply now for shredders. November+cold+snow=Good. Imports-steel-coil-bar=Bad. Holiday month will reduce activity.

4 Scrap Trends Outlook October 21, Perceived November Market Changes (Scrap Trends Outlook Index indicating perceived changes in market direction. All perceptions are measured against Oct.) Perceived Change in Demand Perceived Change in Supply Perceived Change in Prices BEARISH BULLISH BEARISH BULLISH BEARISH BULLISH Index of November Market Factors (Scrap Trends Outlook Index indicating perceptions of market factors. All perceptions are measured against Oct. levels/situations) Perception of Steel Mill Production Perception of Service Center Demand Perception of Total Mill Orders BEARISH BULLISH BEARISH BULLISH BEARISH BULLISH Perception of Export Demand Perception of Dealers Yard Inventory Perception of Local Scrap Supply BEARISH BULLISH BEARISH BULLISH BEARISH BULLISH

5 Scrap Trends Outlook October 21, Index of November Market Factors (Scrap Trends Outlook Index indicating perceptions of market factors. All perceptions are measured against Oct. levels/situations) Perceived Change in Mill Inventory: Perceived Change in Home Scrap: Perceived Change in Alt. Irons Demand: BEARISH BULLISH BEARISH BULLISH BEARISH BULLISH Perceived Change in Seasonal Factors: Perceived Change in Transportation: Percentage responses Change in Historical Factors*: BEARISH BULLISH BEARISH BULLISH BEARISH BULLISH * Changes in price & tonnages for each October-to-November market period over the past ten years. Source: Scrap Price Bulletin What are you hearing about the markets? We re looking for insiders just like you to participate in our monthly market survey. To participate in next month s online survey and receive a complimentary copy of Scrap Trends Outlook, subscriptions@scraptrendsoutlook.com

6 Scrap Trends Outlook October 21, Outlook by Region (based on weighted averages of survey responses) Northeast Midwest South Atlantic South West All Regions Mill Factors * Service Centers * Exports * Dealer Inventory * Brokers * Overall Market 41.6* 39.1* 42.5* 41.4* 38.*.1* *Weighted averages of all survey factors, including those not listed on this table Outlook by Scrap Purchaser* (based on weighted averages of survey responses) Consumer Demand Inventory Home Scrap Orders Production Overall Trend Integrated Mills Mini-Mills Foundries Export Yards.. NA 25. NA 38.3 Brokers NA 25. NA 37.5 Overall Market * Weighted averages of the survey factors included only on this table Outlook by Scrap Seller* (based on weighted averages of survey responses) Seller Mill Demand Inventory Local Scrap Exports Mill Production Overall Trend Generator Processor Dealer Export Yards Brokers Overall Market * Weighted averages of the survey factors included only on this table Methodology: For the above tables, a numerical value is given to the overall trends in each category for the upcoming month after all the survey results of a series of 15 indexes are calculated based on a weighted average and then broken down by region, consumer or seller. A number close to will give a sideways or unchanged reading, while numbers above will give a reading for a bullish trend. The closer to 1, the more likely it is that prices will trend upward. Conversely, a number below will give a reading for a bearish trend. The closer to, the more likely it is that prices will trend downward. N/A means there were too few survey responses to publish a reliable figure, or that the category did not apply to the type of business being surveyed. Regional Views Different factors in markets across North America Northeast: Overall demand is expected to be lower here in November, which could force prices down. Beyond that, supply is volatile, which could prompt changes in the eventual drops. South: Most factors are expected to be down in November, leading to an expectation that demand will decline. Respondents say the November market may not fall as far as October s did. South Atlantic: Expectations for price decreases are not as bad in this region as elsewhere in the country. However, supplies could be stable next month, with diminished demand. Midwest: Weaker broker and mill demand are expected to drive market factors here, although respondents said they would not be surprised if exports remained somewhat flat. Acting as a possible wild card, supplies could be stable, or fall slightly. West: If demand drops as far as expected, this region could become one of the weakest in the country next month. Canada: The prices of most grades are expected to be down or a weak sideways at best next month, on lower demand. Mexico: Prices are expected to be down next month as mills are looking to buy somewhat less scrap, and supplies are flat.

7 Scrap Trends Outlook October 21, Long-Range Outlook (Scrap Trends Outlook Index numbers for the next 2, 3 and 6 months) December Trend: 42.1 (Bearish) Key Indicators for December Capacity rates are in a holding pattern right now, and are not expected to improve soon Mill production will fall off at year s end Mill orders are expected to decrease Alternative irons demand is expected to drop slightly over the next few weeks Winter weather is likely to impede the flow of scrap into sellers yards, reducing supply January Trend:.9 (Bullish) Key Indicators for January Mill inventory levels may decline mid-winter January frequently sees pricing increases Export demand is expected to remain cold for at least the next one to two months Service center demand is expected to drop significantly throughout the next 3- days Local scrap inventories may decline severely as little scrap is moving into the pipeline 6-Month Trend:.8 (Bullish) Key Indicators Over 6 Months Export demand is expected to bounce back at least a little as 216 moves ahead Dealer yard inventories may stabilize Historical figures predict mixed 2nd quarter Election year politics are expected to affect decisions made on the U.S. economy Springtime usually gets scrap flowing again, perhaps leading to a looser supply Top Issues Over Next 3 Months Many expect a long-term increase in scrap prices, in a return to levels from 215 s springtime numbers Some economic indicators could be slowing down Fears over Asian markets could drive demand back down, limiting domestic and foreign buys Despite some positive signs a few months ago, mills are not as busy as hoped for late in 215 Historically, prices move up at the start of a new year, and that is expected to continue in 216 Weather will begin to play a role in northern regions over the next 3- days, perhaps hurting supply Export is expected to remain weaker into late fall and early winter and may not recover for some time Viewpoints on the Next 6 Months November will likely represent the bottom for ferrous scrap prices as they ve adjusted to more historical levels relative to oil, ore and steel. Q1 steel demand, while not robust, will be supported by more domestic production as trade restrictions temper imports. Wishful thinking that by mid-216 the steel industry (will have) seen an improvement in orders and production rates. If they (prices) are not higher, there will be no scrap dealers left. Soft overseas demand. The next issue of Scrap Trends Outlook will appear Nov. 2 and look at perceived December trends. We would like to thank all those in the industry who took the time to complete our Scrap Trends Survey. You will receive a request to be part of the survey no more than once every four weeks. We encourage you to participate so we can continue to offer this reporting. Published monthly by American Metal Market 225 Park Avenue South, 6th Floor New York, NY 13 Global Publisher: Raju Daswani 215 American Metal Market LLC. All rights reserved. Disclaimer This document is for information purposes only. The information contained in this document has been compiled from sources believed to be reliable. Information is collated through surveys with dealers, brokers, generators, processors, and users in the industry and represents a perception of where market factors are and where they may change. While every effort has been made to ensure that the information is correct and that the views are sound, American Metal Market LLC cannot be made liable for any loss no matter how it may arise. Copyright No part of this publication (text, data or graphic) may be reproduced, stored in a data retrieval system, or transmitted, in any form whatsoever or by any means (electronic, mechanical, photocopying, recording or otherwise) without obtaining American Metal Market s prior written consent. Unauthorized and/or unlicensed copying of any part of this publication is in violation of copyright law. Violators may be subject to legal proceedings and liable for substantial monetary damages per infringement as well as costs and legal fees. Scrap Trends Outlook is not responsible for errors or omissions, or for the results obtained by the use of such information, and disclaims any liability to any person for any loss or damage caused by such errors or omissions, including those arising from the negligence of Scrap Trends Outlook, its employees or representatives. For more information on this product, please feel free to call our account management team. CONTACT US For new subscription orders call For outside the U.S. and Canada call For questions about your current subscription call The address for our subscription department is: Scrap Trends Outlook P.O. Box 15577, North Hollywood, CA