2016 Metals Market Outlook

2016 Metals
Market Outlook
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Table of contents
Chapter 1
2016 Metals Outlook – Aluminum
2016 Metals Outlook – Flat-Rolled Steel
2016 Metals Outlook – Steel Tube and Pipe
2016 Metals Outlook - Titanium
2016 Metals Outlook – Stainless Steel
2016 Metals Outlook – Ferrous Scrap
2016 Metals Outlook – Imports/Exports
2016 Metals Outlook – Raw Materials
2016 Metals Outlook – Secondary/Aluminum
2016 Metals Outlook – Copper
2016 Metals Outlook – Nickel
2016 Metals Outlook – Service Centers
Chapter 2
Trending in Scrap – Ferrous
Trending in Scrap – Non Ferrous
Trending in Scrap – Global
Trending in Scrap – Regional
4
6
8
10
12
14
16
17
19
20
22
24
26
29
31
33

4
An uphill downstream challenge
plagues producers
2016 Metals Outlook – Aluminum #1
Otherwise favorable conditions have been severely
neutralized by the global supply glut caused by the
government of China’s continued unfair subsidization of
additional capacity expansion and further assistance to
maintain existing capacity irrespective of forces.
— Michael Bless, Century Aluminum Co.
‘‘
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2016 is shaping up to be an interesting year for
aluminum, one where companies will continue to move
toward embracing their value-add/downstream
business as their primary breadwinner—while
suppliers question if worldwide depression will
continue on the aluminum market.
The uphill battle domestic producers face against the
producing power of countries like China is staggering.
According to current estimates from consulting firm
IHS Inc., a global surplus of 650,000 tonnes is
expected for 2016. A surplus in Chinese production
has been cited as the reason for numerous industry
woes, including prices on the London Metal Exchange
hitting as six-year low, and a rash of smelter closures
in the United States by Pittsburgh-based Alcoa Inc.
and Chicago-based Century Aluminum Co.
“Otherwise favorable (market) conditions have been
severely neutralized by the global supply glut caused
by the government of China’s continued unfair
subsidization of additional capacity expansion in China
and further assistance to maintain existing capacity
irrespective of market forces,” Century president and
chief executive officer Michael Bless said in a
statement Oct. 29. He added that “this behavior has
caused a meaningful deterioration in the operation of
orderly global markets.”
The proliferation of “fake semis,” semi-fabricated
aluminum designed for the purpose of remelt back into
primary aluminum—thus dodging a 15-percent export
tax on Chinese P1020—is a key reason that aluminum
prices have plummeted in 2015, according to Century.
The LME’s three-month contract for aluminum closed
the official session Nov. 23 at $1,435 per tonne (65.1
cents per pound)—the lowest level since $1,416.50 per
tonne (64.3 cents per pound) on May 29, 2009.
Meanwhile, the bottom fell out of the Midwest
aluminum premium in 2015, hitting a high of 24 to
24.25 cents per pound in mid-January before tumbling
down to 6.75 to 7.25 cents per pound by the end of
September, a 71-percent drop according to AMM
assessments.
For 2016, indicators suggest that a return to
double-digit premiums is not likely—although the spot
premium has experienced an uptick to round out the
end of the year. The CME Group Inc.’s Midwest
premium futures for 2016 have the premium projected
at over 9 cents per pound as of Nov. 23. Market
participants say that they don’t anticipate a tightening
of supply for primary aluminum in 2016, thus causing
many end-users to leave approximately 20 percent of
their metal needs open for spot activity on 2016
contracts.
Meanwhile, AMM’s assessment of the Midwest
premium rose consistently through November, starting
the month at 7.25 to 7.5 cents per pound and rising to
8.5 to 8.75 cents per pound as of Nov. 23. The rise in
the premium is tied mostly to the market’s reaction to
Alcoa’s announcement of the curtailment of production
from three of its smelters beginning in the first quarter
of 2016, a move that removes 503,000 tonnes of
capacity in the United States.

5
However, not all experts
are sure that “more of
the same” is what’s on
tap for next year.
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Some experts believe that even with the U.S.
curtailments, pressure on aluminum prices will remain
on the downside.
“There is excess capacity, certainly for aluminum in
2016,” Carol Cowan, senior vice president at Moody’s
Investors Service Inc., told AMM. A recovery of sorts
for aluminum and commodities in general is “unlikely,”
Cowan says, with economic growth in regions
worldwide slowing—a supply overhang of material is
expected to continue through next year, “more of the
same.”
“What I think is causing a lot of pressure is not only
supply but inventories,” Hamza Khan, a commodities
analyst with ING Groep NV, told AMM. He noted that
current price pressure is partially fueled by aluminum
leaving LME warehouses and entering the market, as
opposed to moving to other warehouses as part of
financing deals. However, with curtailments decreasing
new supply and increasingly eating into the world’s
existing supply overhang, a sense of scarcity may
enter back into the market for 2016.
Alcoa, which announced the split of its upstream and
downstream businesses in late September, is betting
that scarcity will return, and has forecasted that the
global aluminum market will be at a 360,000-tonne
deficit in 2016, fueled by increased demand outpacing
growth in production capacity in both China and the
rest of the world.
As uncertain as the upstream sector appears to be,
the more downstream value-add side of the business
is set to continue its growth in 2016, fueled mostly by
burgeoning aluminum usage in the automotive
industry.
2015 proved to be a big year for advancing the
proliferation of aluminum into autos—driven largely by
the success of Ford Motor Co.’s aluminum-intensive
F-150 pickup truck. Through October 2015, F-Series
sales made up 629,951 units of the 2,186,126 sold by
Ford—29 percent, according to the company’s
monthly sales figures.
Ford is expanding from just the F-150 for next year’s
lineup. For aluminum suppliers, many of whom are
staking much of their future on converting formerly
can-stock producing facilities into producing
automotive sheet, the success of Ford will hopefully
serve to entice other original equipment manufacturers
(OEMs)—notably General Motors Co.—to join in.
In 2016, 37 new vehicles are scheduled to be
launched, compared with 33 in 2015, according to
Troy, Mich.-based consulting firm Ducker Worldwide
LLC. On average, vehicles in 2015 contained 390
pounds of aluminum, which is set to grow to 500
pounds of aluminum by 2025, according to Ducker’s
estimates. To meet increasing aluminum usage in the
coming years, Ducker predicts that 2.1 billion pounds
of aluminum sheet will be needed by 2020.
This news bodes well for aluminum suppliers whose
expansions are set to come online in 2016, notably
Alcoa’s San Antonio, Texas, micro-mill, which is
producing material to be used in Ford’s 2016 F-150, as
well as other Ford models.
Other facilities, such as Constellium N.V.’s Muscle
Shoals, Ala., plant, will not enter the market until 2017
and after.
For the consumers’ part, as long as oil prices remain
low, the appetite will be for big trucks and sport utility
vehicles (SUVs), vehicles that demand increased
usage of aluminum to meet fuel-efficiency goals, Chris
Kuehl, managing director and co-founder of Lawrence,
Kan.-based Armada Corporate Intelligence, told AMM.
“I think it’s going to take what happens in a 2-3 year
gap, with oil being $4 per gallon,” Kuehl said, outlining
the scenario for how a consumer switch to preferring
smaller cars could take place.
KIRK MALTAIS

Demand ranges from
weak to stable, but there
is still a high amount of
inventory being sold at
“fire-sale prices,” market
sources said, noting that
this is bringing sheet
prices down.
The U.S. steel steel industry could see a modest
margin improvement next year if scrap prices stabilize
and steel tags edge up on trade case rulings and
continued robust demand, according to some
executives in the sector.
Automotive and construction demand, which
historically have accounted for 25 percent and 40
percent, respectively, of U.S. steel consumption,
remain strong and look positive headed into 2016,
Steel Dynamics Inc. (SDI) president and chief
executive officer Mark D. Millett told analysts during
the fall.
“We expect a relatively flat scrap market in the months
ahead” at the same time that “fundamentals are
supportive of a continued positive trend in economic
growth in the U.S.,” Millett said.
Meanwhile, imports “have consistently receded year to
date and the trade cases under review will likely
reduce them further,” he said. Imports, especially of
flat-rolled products, were cited as a key headwind by
SDI executives.
U.S. steel imports tumbled in November as flat-rolled
imports from some countries targeted by trade cases
have dropped off the radar, with further declines seen
ahead.
However, other nations might be trying to fill the void
left by China, India and South Korea in the wake of
three landmark flat-rolled trade petitions, the figures
suggest.
“We continue to believe import volumes will trend
lower near term given (a) the lower domestic steel
premium vs. global (prices) and (b) pending trade
cases,” New York-based investment research firm
Jefferies LLC said in a Dec. 2 research note, indicating
the latest figures marked a seventh consecutive month
of year-on-year declines.
Unfortunately, slowing imports might not be enough
save a troubled U.S. steel market, Jefferies analysts
said. “Although November’s imports are a move in the
right direction, supply-side issues continue to weigh on
the domestic market with elevated inventories
persisting,” they said.
U.S. flat-rolled sheet prices slipped again in November,
reaching a 77-month low, and could lose further
ground if buyers continue to sit on the sidelines,
according to market sources.
“We’re going to hit bottom again soon (though), I
actually think it can go down to maybe $17.50 (per
hundredweight)—after that it can’t get any lower,” one
Midwest distributor source said.
Meanwhile, lead times remain short, sources said.
However, there is a possible light at the end of the
tunnel, sources said, noting that this depends on how
much the government can curb U.S. imports.
“People have to start restocking soon. By the first
quarter there may be less imports coming in and
capacity will be taken down, and that should jump start
the market a bit,” the first Midwest distributor said.
Prices remain mired at 2009 lows as rumored mill
shutdowns are becoming a reality, market participants
said. Prices for benchmark products now stand at lows
not seen since June 2009, the depths of the last
recession.
“It’s ugly. We’re all hoping it gets better next year, or
we’re all out of work,” one Midwest service center
source said. There is little urgency to place new orders
because mill lead times are short and prices are
expected to move lower in the coming weeks, he
added.
Recent data from the Metals Service Center Institute
(MSCI) reflect those trends, with flat-rolled shipments
falling to their lowest point in the year as inventories
surged to their highest point since February.
Steel looking with hope to a
steadier, healthier market
2016 Metals Outlook – Flat-Rolled Steel #1

U.S. service centers shipped 2.12 million tons of
carbon flat-rolled steel in September, down 2.9 percent
from 2.18 million tons in August and off 9.7 percent
from 2.35 million tons in September 2014, MSCI data
indicate.
Inventories, meanwhile, totaled 5.93 million tons (2.8
months’ supply at current shipping rates) in
September, up 2.5 percent from 5.78 million tons (2.7
months’ supply) in August and up 5.5 percent from
5.62 million tons (2.4 months’ supply) in September
2014, MSCI data indicate.
“Right now, it’s a little slow out there. So it’s one day at
a time, and it’s little bit nerve-wracking,” a second
Midwest service center source said. But steel buyers
might be making a mistake if they assume 2016 will
look like 2015, he said.
Steel consumers loaded up on steel toward the end of
2014 only to see prices fall throughout 2015, and they
are determined not to make the same mistake again
next year, the source said. The problem is, too many
people taking a conservative approach to the market
results in big risks.
“It can’t slip much more than it is today, or we’re all in
trouble,” the source said. “But even though we know
that, we’re not buying.” That could make for an
interesting 2016, especially as the impact of trade
cases and shutdowns begins to be reflected in prices
and mill lead times, he said.
“Then everyone will jump in at once, it will push the
prices too high—to the point that it’s not a real
price—and then it will come down again,” he said.
But the mini-cycles typical of past years might take a
hiatus in 2016 given a global glut of steel and
steelmaking raw materials, other market participants
said.
“There is just too much of everything. And nothing is
going to perk up until the miners stop making iron ore
and the mills stop making steel,” a third service center
source said.
Capacity reductions also should help steel markets
next year, according to Millett. “Reduced imports, idling
of domestic capacity (and) upward-trending demand
should create a positive pricing environment that
should allow some room for price appreciation going
into 2016,” he said, without offering specifics on
potential price upticks or timing.
Price gains and import declines after 2016 trade case
rulings could be modest, Millett warned. “We’re not
going to see a precipitous drop in imports and a sort of
exponential, ‘hockey-stick’ improvement in pricing”
immediately after trade case rulings, he said.
STAFF REPORT

Without demand, spot
prices weaken and
inventories build—a
dangerous mix of high
supply and low demand.
Steel pipe and tube market players everywhere are
asking themselves the same question. Will the industry
recover in 2016, or is the year over before it even
begins?
“I’m in the ‘late 2016, but more likely 2017’ camp,”
Kimberly Leppold, senior analyst in Metal Bulletin
Research’s tube and pipe group, said. “I expect—or
rather, hope—that much of the freefall is over.”
“I don’t see anything early on in 2016. If there’s a
recovery, it’s going to be late in 2016,” said Pipe Logix
LLC manager Kurt Minnich. “If we do see some
recovery, I think it will be limited until we see some real
changes in oil production.”
Unlike tubing inventories, optimism for 2016 is in short
supply.
“We’re not being overwhelmed with budget quotes
right now for 2016,” one distributor said. “I just think it’s
going to be a lot more of the same.”
Surprisingly, “more of the same” might be good news
for tubular producers and suppliers after a tough 2015.
The oil and gas industry fell off a cliff this past year.
Western Texas Intermediate (WTI) prices flatlined in
the summer close to $60 per barrel—only to weaken
further in the fall, tumbling as low as $40 per barrel.
In 2016, most in the steel pipe supply chain
believe—or hope—that the lower-for-longer pricing
environment will linger throughout the year. And that
mills will not see the same pricing freefall in 2015.
“I don’t think there’s going to be the severe price
drops,” the distributor said. “But let’s see what
happens.”
Oil exploration and production majors responded at
first by trimming fat from their portfolios and raising
cash. But with the double-dip in November, when WTI
slipped down to $40 per barrel again, exploration and
production companies (E&Ps) are taking a serious
look at next year’s capital expenditures budgets,
especially at the number of active and planned rigs.
Rig count remains the primary metric for testing the
health of energy tubulars, particularly oil country
tubular goods (OCTG). 2015 began with 1,811 active
oil and gas rigs, according to the weekly count by
Baker Hughes Inc. As of Nov. 20, that number stood at
757—a 58-percent decline over the past 11 months.
Simply put, pipe cannot go into the ground without a
rig to hold it.
“Rig activity will be constrained by wells that have
been drilled and then capped,” Metal Bulletin
Research’s Leppold said. “Those will be utilized first
before new ones drilled which will not weigh into rig
counts or OCTG demand.”
“Rig count is a really easy indicator and is certainly
tied to OCTG demand,” Minnich said. “Rig efficiency
has so far softened the decline. When we start adding
rigs, they will be very efficient and consume a lot of
OCTG as they come back online.”
“We hope we are nearing the floor, but we haven’t
seen it,” one trader said. “Profits margins have been
slim to nonexistent.”
AMM’s pricing assessments show a 21.7-percent
decline in OCTG API 5CT J/K55 casing in 2015, from a
spot price of 1,140 per short ton in January to $900 in
November.
Rig count may spur demand, but energy tubulars
cannot recover on demand alone. The oversupply in
the steel tube and pipe market has severely undercut
many efforts to boost margins. Most distributors have
resorted to taking orders only when necessary and
turning around lots as soon as they enter the
warehouse.
The aggressive, yet managed, liquidation has shown
few positive signs by the end of 2015 but may bear
some reward in 2016.
“I believe supply and demand will become more
balanced by probably the middle part of 2016,” the
trader said. “We’ll see some improvement.”
Can new year put some energy
back into the market?
2016 Metals Outlook – Steel Tube and Pipe #1

“We are expecting a marginal increase in 2016 OCTG
apparent consumption over 2015, predominantly in the
second half of the year with some early-year activity in
the most-used sizes and grades,” Leppold said. “But
there is still too much inventory on the ground that has
to be worked through as far as pipe is concerned.”
Others are much less optimistic.
The backlog extends beyond OCTG. Even line
pipe—a product that has shown a little more pricing
resilience, especially in the larger diameters—is
suffering supply woes. Longer lead times on most
pipeline projects insulate line pipe orders from much
of the pricing pressure, but that does not change the
fact that when those pipeline projects fail, substantial
inventories add more risk to the industry.
“Most of us are taking
horrific losses,” a second
distributor said.“We’re
either selling inventory to
pay off debt to keep our
doors open or bleeding
retained earnings.”
One high-profile example is the TransCanada’s
Keystone XL pipeline, which after an eight-year review
process was denied a presidential permit late in 2015
to cross the U.S.-Canada border. While the company
hopes to explore all avenues for continuing the project,
that still means 1,179 miles of 36-inch line pipe will
continue to sit with nowhere to go—unless
TransCanada Corp. shifts the pipe to other projects or
sells it off.
Domestic tube mills have aggressively sought new
duties this year for several pipe products—from
standard pipe all the way up to large-diameter line
pipe. The final results of many of these cases will be
announced in the first half of 2016 and may provide
some relief from the inventory glut. However, opinions
have been split. The U.S. Commerce Department’s
lengthy evaluation process and challenges to duty
rulings from the Court of International Trade and the
World Trade Organization have shaken the tube
market’s faith in the antidumping and countervailing
duties process.
The trade glut in steel still closely follows the trade glut
in oil, as the Organization of Petroleum Exporting
Countries (OPEC) continues to pump record highs to
compete with U.S. shale for market share. The global
energy supply chain has already begun to shift.
MICHAEL LAMBERT

Real growth in the market is
not expected until at least
2017 when the first of
announced production rate
increases by aircraft original
equipment manufacturers
like Chicago-based Boeing
Co. and Toulouse, France-
based Airbus SAS kick in.
While titanium did not exactly soar through the end of
2015—as pricing remained relatively flat despite strong
market demand—there is hope that 2016 will fare
slightly better.
But real growth in the market is not expected until at
least 2017 when the first of announced production rate
increases by aircraft original equipment manufacturers
like Chicago-based Boeing Co. and Toulouse,
France-based Airbus SAS kick in.
“It’s getting better but until we hit 2017, 2018 and 2019,
that’s really where the growth could be,” Chris D. Olin,
president of Cleveland-based Olin Research Group
LLC, said.
Titanium prices have remained flat for most of the year
although market players said demand is strong.
Much of the pricing pressure can be attributed to lower
raw materials costs. Scrap has been down, according to
market sources.
Data from the U.S. Geological Service showed
domestic mill product shipments totaled around 10,000
tonnes (about 22.05 million pounds) in the second
quarter, representing an 11.7-percent increase from
8,950 tonnes (19.73 million pounds). Government data
is often delayed by two quarters.
Although some numbers coming from analysts paint a
tougher picture of the third quarter, which saw
shipments fall 3.6 percent to 188 million pounds.
Titanium has had a banner year in the news, but not so
much for demand or any other breakthrough, rather for
the big ticket mergers that were announced.
Portland, Ore.-based Precision Castparts Corp. (PCC),
the largest vertically integrated supplier castings and
forged components to the aerospace and industrial
sectors, was bought by Warren Buffett’s Berkshire
Hathaway Inc. for $37.2 billion in August, the biggest
acquisition for the Omaha, Neb., firm. PCC owns
Titanium Metals Corp. (Timet), Exton, Pa.
New York-based Alcoa Inc. completed its $1.5-billion
acquisition of Pittsburgh-based RTI International Metals
Inc. on July 23.
These moves were seen as a way to gain a foothold into
the ever-growing aerospace market, a sector
considered a bright spot in an otherwise bleak market
for all metals, and one where titanium is lining up to
shine. Both PCC and RTI are suppliers to Boeing and
Airbus as well as other companies that make parts and
engines for aircraft.
Aerospace represents the largest end-market for
titanium with about half of all demand going into the
sector.
The use of titanium for aircraft is increasing over
aluminum or other specialty alloys as more aircraft
manufacturers are turning to composites for the
structure of the airplane as well as in the next
generation jet engines.
Unlike aluminum, titanium is non-reactive to composite
materials. The more composites used in an aircraft,
there are usually more titanium needed to act as
fasteners.
Next-generation aircraft from Boeing and Airbus are
expected to use more composite materials and titanium.
Some of these aircraft, like Airbus’ A320neo and
Boeing’s 787 MAX are already in the pipeline.
Airbus announced a revised target delivery rate for the
A320 to 60 per month by 2019 from 50 per month by
2017. Boeing is also expected to announce its own
production rate increase for the 737 from its current 55
per month.
Demand curve creates a tough
angle to navigate
2016 Metals Outlook – Titanium #1

And while there are bright
spots for titanium for 2016,
not all of its end-markets
are expected to do well
and may affect the growth
of the market.
Olin said it’s possible the second half of 2016 will see
higher order and shipment rates for titanium as
suppliers need to buy their materials in advance.
“They would need that metal at least six months in
advance. But of course the challenge is that there are
no canceled orders,” he said.
Passenger growth is projected to increase by 3.6
percent from 2016 to 2024.
Industry players have said they’re confident the
aerospace market is “strong.”
“It just shows that we’re on the right path and we chose
the right industry,” one titanium distributor in the
Midwest said.
As rosy the picture is, the third quarter of 2015, though,
dependent on the strength of aerospace, failed to take
off.
Orders for aerospace in the third quarter fell, surprising
many in the titanium industry.
“We were thinking that people will be placing business
in the fourth quarter for aerospace, but there’s still no
major uptick in demand,” a source at an East Coast
producer said.
Another bright spot is the medical industry.
Titanium is often used to make hip or other bone
implants because it is does not react to chemicals in
the body. Lately, medical researchers have been
manufacturing implants such as 3-D printed ribs.
But while it is a burgeoning sector, Olin believes there is
not enough tonnage involved to offset any potential
volume dropoffs from other end-markets.
The industrial sector has been hobbling throughout
2015 as some projects that have to do with the oil and
gas sector have been curtailed. Desalination projects,
which tend to favor titanium for its non-corrosive
properties, have also been few and far between.
Order volumes for titanium for industrial uses slowed to
about 1.7 percent in the third quarter of 2015 from an
estimated 0.9-percent growth the preceding quarter.
Analysts said the industrial sector is a far more
important sector than the medical sector because big
tonnages of titanium are needed for the projects as
opposed to the smaller amounts of the metal used to
make new ribs or hips.
For the next few years, however, there may be some
hope.
Some chemical processing projects—currently
concentrated in Asia—are being brought over to North
America in the medium term. These projects have an
estimated $100-billion capital investment until 2025.
Kevin J. Cain, president of Moon Township, Pa.-based
Uniti Titanium LLC also believes that once alternative
fuel projects like those for liquefied natural gas or
fracking takes off, titanium will play a huge part in the
manufacture of tubes, fittings, tanks and fasteners.
The outlook for titanium is definitely a much rosier
picture in 2016 than the otherwise tepid 2015 that it
faced, the industry says, and the market has the
potential to be bulletproof as the long-term vision for its
end-users looks to continue opening up.
EMILIA DAVID

The stainless steel market in North America isn’t doing
great but it’s also not doing terribly, and in 2016 the
industry is maintaining a “cautiously optimistic” outlook
about how the underlying fundamentals of the
industry—prices, demand, inventory levels and
imports—will affect growth in the new year after a
decidedly depressed 2015.
The past year had been a disappointing one overall for
the industry, counsel for the Specialty Steel Industry of
North America (SSINA) David “Skip” Hartquist told
AMM.
Even for several of the biggest producers, profits
steadily declined as domestic demand took a hit from
imports, notably China and Taiwan; in the third and
fourth quarters (depending on the company’s financial
reporting styles) most posted losses—
Pittsburgh-based Allegheny Technologies Inc. (ATI)
posted a $144-million loss in its third quarter. Finnish
stainless giant Outokumpu Oyj posted a $123.5-million
loss, although it named its suffering Coil Americas
operations its top priority going forward. Even Acerinox
SA, the Madrid-based parent company of North
American Stainless Inc. (NAS), saw a pre-tax loss of
$8.55 million, and reported an apparent consumption
drop in North America of 5.6 percent in its third-quarter
report.
Stainless steel growth in the United States and
Canada was at a standstill during the first half of this
year, but Mexico has been the tiger of the North
American industry as its production jumped 300
percent, according to analyst Markus Moll, managing
director and senior market research analyst at Austria’s
Steel & Metals Market Research GmbH (SMR), who
added that Mexico is the place to be for fabricators.
Short-term consumption in the United States was
negative and the outlook is for no short-term growth,
although there are some positives for the industry, Moll
said. While the oil and gas industry slowdown has
affected upstream activity, the downstream
sector—particularly chemical operations—needs
stainless steel sheet for tanks and pipes; the housing
market is finally seeing an uptick with a sustainable
10-percent growth; and catering also is good and will
get better.
The single-largest driver of an overall stainless
industry slowdown has been China, something most
analysts—including Moll—failed to foresee, he
acknowledged, and the industry needs an
improvement in China in 2016, especially to spur a
recovery in raw material prices.
“(Producers) thought the market would improve
somewhat this year and in part that’s when imports
really started to roll in both in flat products and long
products in the early part of 2015, but that optimism
soon changed course and by the time we got into the
third and fourth quarters it was a very different
situation,” Hartquist said. There’s also a lot of inventory
in the country at the moment, he added.
Imports have been declining steadily since April this
year, from 109,560 tons to 64,533 tons in September,
but surged again to 133,044 tons in October, according
to U.S. Census data.
“To a certain extent inventory has backed off a little bit
because material has come in during the earlier part of
the year that’s got to be burned off before we see
orders pick up and I think most companies would
probably say that 2016 looks flat, possibly a little better
than 2015, but there isn’t a lot of optimism out there;
it’s a pretty tough time for the industry,” he said.
The latest Metals Service Center Institute (MSCI) data
show that that stainless shipments by U.S. service
centers, while they have fluctuated over the last 10
months, have been generally declining, especially
when compared with volumes over the same time last
year. Inventory volume on the other hand, while
declining, has remained significantly higher compared
with the same time last year, suggesting turnover rates
are not as efficient as before. In the last three months,
however, inventory levels have begun to fall more
substantially, although how quickly that inventory is
being restocked is still not clear.
Industry sources have been claiming that the priority
right now is to make whatever sales they can and clear
inventory—most often at a loss since much of the
stockpiled material was amassed during days of higher
prices.
Despite the challenges, North America, though, still
remains a bright spot for the industry.
“Based on some of the strengths we’re seeing in key
end-use sectors, of all the regions North America—the
United States especially—is doing the best,” Jason
Kaplan, senior manager of IHS Inc.’s pricing and
purchasing service in London, told AMM in a
Are views of the market
fundamentally sound opinions?
2016 Metals Outlook – Stainless Steel #1

Despite the import flood,
North American
producers remain upbeat
about the market outlook
in the long term.
telephone interview. “There are clearly some risks from
various sides, and the United States isn’t insulated
from the rest of the world. But generally, out of all the
regions, as a stainless steel producer I’d like to be
based in the United States.”
That doesn’t mean the market is doing exceptionally
well—just that it’s doing better than the rest of the
world, particularly China.
“What we’re seeing is a significant problem in Chinese
construction—and not just building. Typically when
someone builds a new house they will also buy new
cutlery and new appliances, which all use quite a
significant amount of stainless steel,” he said. “We’ve
seen a significant drop in Chinese construction in the
last two or three years, so Chinese market demand
has been significantly cut.”
China’s economic growth is slowing, and as the major
global stainless steel producer China is seeking new
markets—and the primary destinations have been
Europe and the United States.
The European Union imposed antidumping duties on
Chinese and Taiwanese cold-rolled flat stainless steel
in August, and while stainless suppliers in the United
States are keeping a close eye on imports, they
haven’t yet asked the U.S. government to follow suit
“There are no duties into the (United States), so that
gives a real incentive to ship (here),” SSINA’s Hartquist
told AMM in September. “We have seen substantial
increases in imports in 2015, particularly from China,
so it’s something we are looking at carefully.”
The SSINA has no immediate plans to pursue a trade
case against stainless steel imports, but its members
have significant concerns, Hartquist had said then.
Ghent, Ky.-based North American Stainless, one of the
largest domestic stainless steel producers, said in
August that it expected the market to continue growing
at a sustained 4 to 5 percent from 2016 onwards
despite a dip in 2015 (amm.com, Aug. 12).
But Kaplan thought the prediction is a little too
optimistic. “There’s almost going to be no growth in
stainless steel demand.... It’s going to be a few
percent—historically it’s been 6- or 7-percent or even
double-digit growth.
(Such growth) would be very good for (producers),” he
said. “Given the dropoff in demand in key markets in
stainless steel...I don’t see that happening. I’d be
pleased if it did—it would make the market very
buoyant—but there’s nothing to support that view.”
ATI, another major U.S. stainless producer, also has
an upbeat outlook for 2016. “I don’t have the view that
the depth of the challenges in 2015 that are impacting
stainless are necessarily going to continue into 2016,”
Richard Harshman, chairman, president and chief
executive officer, said during the company’s
third-quarter earnings conference call. “I think that
(the) 2016 demand profile, assuming the economy
continues at a very kind of slow, moderate pace, from
a demand standpoint will be better.”
But Harshman noted that imports from China did
pressure the U.S. market at a vulnerable time. “It found
its way into the U.S. really at a time where underlying
demand was not great. It was OK—it was not great.
But it was enough of a volume that it really wreaked
havoc on base prices and drove it to the level it is
today. And I would argue that the level of material that
was brought in was so significant that some of it still
remains in the supply chain,” he said.
Looking forward into 2016, some of the
macroeconomic indicators that can help spur the
industry include improvements in consumer
consumption, capital expenditures, government
spending and material, SMR’s Moll said.
One major caveat to this, though, he added, was that
consumer consumption as a market driver could slow if
U.S. interest rates increase, as they are expected to
next year. But with 2016 an election year, he said,
there should be additional infrastructure work.
The industry still has a while to go to reach its
potential, though.
The entire stainless steel industry is valued at $35
billion, Moll estimated.
“That’s less than Uber (Technologies Inc.), which has
a market value of over $51 billion. That’s not (good
news). But that just means we need to get our own
companies valued (well) in the market again,” he said.
CARLA BRIDGLAL

Steelmakers tied to gas
and oil prices operated at
reduced schedules or
idled completely for
months at a time in 2015.
The U.S. ferrous scrap market is gearing up for
another brutally taxing year as recyclers feverishly
work to operate as lean as possible, including more
downsizing or closing of operations, lowering their
headcounts and conserving cash in the face of a
sobering new reality.
Many players in the secondary metals industry may
not be around at the end of the 2016 as there will be
more casualties from the most brutal environment
anyone can remember.
Metal recyclers have been navigating in choppy waters
for nearly a year when prices fell $80 and $100 a gross
ton in February 2015.
There is nothing on the horizon to suggest that when it
arrives the rebound will mirror early 2009, when prices
began an earnest recovery that was almost as fast as
their 2008 decline. Reduced demand among
steelmakers and muted demand in the export arena
has created lackluster demand overall.
In order for the market to recover, four key indicators
that have contributed to the downturn would have to
occur: the strong U.S. dollar would have to weaken;
gas and oil prices would have to spike; iron ore prices
would have to move higher; and China’s exodus from
the export of semi-finished and finished steel products
would also have to happen to precipitate a turnaround.
The dollar may weaken if the government raises
interest rates, but the likelihood of the other three
occurring is unlikely.
“China will not stop selling steel because it needs to
protect its own economy, which is not doing that great,”
a southeastern recycler said. “The Saudis have made
it clear they plan to keep pumping out oil as part of
their strategy to stop the U.S. from producing.”
Scrap-consuming steel producers tied to gas and oil
have contrasted outlooks for 2016. One Ohio mill is
projecting to perform slightly better in 2016 but will still
be running at half of where they were two years ago.
“One (Ohio) mill has told me they will buy 300,000
tons. They normally buy 720,000 tons in a year and
bought about 170,000 tons (last year),” a supplier to an
Ohio mill heavily reliant on the gas industry said.
A second southeastern sheet mill has abandoned its
hope for a gas and oil rebound. The mill has now
started buying more scrap low in manganese and
copper, so that it can target its sales into the appliance
market.
Turkey, historically the premier customer for domestic
scrap, is expected to continue to augment its raw
material purchases with Chinese billet. The strong U.S.
dollar also makes domestic scrap more expensive to
offshore customers. “Export has been in the tank for a
few years now,” a seller to the export docks said.
The difficult operating environment will roll over in the
new year, with uninspiring mill operating rates,
numerous bankruptcies and voluntary closings of
recycling facilities. Other companies are actively trying
to sell themselves to other players with deeper
pockets.
It may be a blessing if prices don’t spike because that
would be the death knell for struggling recyclers,
according to an industry veteran. “Most can hold on
during the downturn by conserving resources and
relying on cash on hand to survive. But when prices
spike, many won’t be able to buy inventory and be
forced to close their doors. It is not during a down
cycle but after prices spike that the most closings
occur,” the veteran said.
The year will also see a disruption in the hierarchy of
prices, and could also result in obsolete grades selling
at a premium to prime scrap such as No. 1 busheling.
Industrial generators continue to churn out prime
scrap, which is bought on a monthly contract. Obsolete
grades, such as heavy melting scrap and shredded
scrap, are extremely price sensitive. The depressed
selling prices makes scrap procurement for the
peddler trade an unprofitable endeavor.
“Even with cheap gas prices, there is just not enough
money in it that makes it worthwhile. Peddlers will find
other jobs to do like plowing snow and chopping wood
Recycling recovery hopes pinned
on greater demand
2016 Metals Outlook – Ferrous Scrap #1

Both are expected to
begin buying after March
and this could lead to an
additional need for
200,000 tons of scrap in
the Southeast.
where they can make money,” a Pittsburgh scrap
player said.
One bright spot will emerge in the Southeast after the
first quarter. Two new mills under construction—Big
River Steel LLC in Osceola, Ark., and the Fairfield,
Ala., electric-arc furnace under construction by U.S.
Steel Corp.—will both require significant amounts of
raw material.
Big River’s river location near the Mississippi River
makes the mill a potential customer for Chicago players
who can send material down the river. The Chicago
market is reduced to about 30,000 gross tons a month
at times and the prime material in surplus has been
springboarded into other areas, including Detroit and
Cincinnati.
Recyclers in the St. Louis region will have to
springboard extensively as Pittsburgh-based U.S. Steel
intends to temporarily shut down its Granite City, Ill.,
mill.
The low iron ore prices are disrupting the global steel
environment as it is creating a surplus of cheap
products that has brought an onslaught of antidumping
cases. Scrap metal suppliers selling to flat-rolled
facilities had hoped to see the U.S. Department of
Commerce deliver its opinion in December, which
could result in improved order books, but the decision
has been delayed until March.
LISA GORDON

The Steel Manufacturers
Association (SMA) is
concerned about what it sees
as attempts to water down
so-called “Buy America”
requirements for government
procurement, noting renewed
lobbying by diverse interests
against the existing rules,
according to SMA president
Philip K. Bell.
It may be that domestic steelmakers will reap some
benefits from legal challenges to trade inequities
during 2016 even before any actual rulings are handed
down on several cases.
For instance, U.S. steel imports tumbled in November
as flat-rolled imports from some countries targeted by
trade cases have dropped off the radar, with further
declines seen ahead.
However, other nations might be trying to fill the void
left by China, India and South Korea in the wake of
three landmark flat-rolled trade petitions, the figures
suggest.
“We continue to believe import volumes will trend
lower near term given (a) the lower domestic steel
premium vs. global (prices) and (b) pending trade
cases,” New York-based investment research firm
Jefferies LLC said in a December research note,
indicating the latest figures marked a seventh
consecutive month of year-on-year declines.
Unfortunately, slowing imports might not be enough to
save a troubled U.S. steel market, Jefferies analysts
said.
“Although November’s imports are a move in the right
direction, supply-side issues continue to weigh on the
domestic market with elevated inventories persisting,”
they said.
Several groups, including a number of steelmaking
companies, have targeted the “melted-and-poured”
standard specifically, which requires U.S.-based raw
steelmaking and which works against some imports of
semi-finished steel, Bell said in an Oct. 30 interview
with AMM.
“The SMA steadfastly supports Buy America
provisions,” Bell said. “Although they’re longstanding,
although they work, they continue to be under assault.”
Bell did not name specific interest groups or
companies, but the Washington-based trade
association has said in the past that U.S. slab
converters are among those who have spent money
lobbying to weaken Buy America.
Foreign trade agreements could also potentially
involve tweaks to Buy America provisions, but the
Trans-Pacific Partnership (TPP) and the EU-U.S.
Transatlantic Trade and Investment Partnership (TTIP)
apparently do not contain any such provisions yet, Bell
noted.
It’s also important to monitor semi-finished imports, to
ensure that finished steel processed from foreign
feedstock like slabs or billets, do not end up sold to
Buy America projects, if the full “melted-and-poured”
standard is not met, Bell added. That presents a “very
difficult” enforcement problem, he noted.
Other priorities for the SMA, which represents electric
furnace steelmakers, include fair trade and global
overcapacity, Bell said.
SMA members, including steelmakers like Charlotte,
N.C.-based Nucor Corp. and Tampa, Fla.-based
Gerdau Long Steel North America, have become more
politically engaged lately, he said.
There’s been an uptick in Capitol Hill visits, an official
SMA political action committee (PAC) launched in
2014, and more co-operation between trade
associations, companies, and labor groups, partly
sparked by a tough market environment in 2015,
according to Bell.
“When you look at how tough this year has been, and
then at forecasts for next year, it’s clear that trade
associations, labor and companies need to be working
together in a coherent way,” Bell told AMM.
STAFF REPORT
Legal action may already be
helping to balance trade
2016 Metals Outlook – Imports/Exports #1

The company reported U.S.
iron ore revenues during that
period in the area of $1.15
billion, down from $1.6 billion
in the year-earlier period.
If in 2014 a dark cloud hung over domestic steelmaking
raw materials, 2015 brought the storm. After prices for
iron ore and metallurgical coal already started their
descent in the prior year, 2015 saw even more
depressed markets, a growing supply gut caused by
weakening demand, and ramifications in the form of
idlings, workforce reductions and full-on bankruptcies.
Coal took it on the chin more than most in 2015, as a
handful of prominent met coal producers—Alpha
Natural Resources Inc., Walter Energy Inc. and Patriot
Coal Corp.—filed for Chapter 11 last year. While
Bristol, Va.-based Alpha and Birmingham, Ala.-based
Walter are in the process of reorganizing, St.
Louis-based Patriot sold off all of its assets to
Blackhawk Mining LLC and the Virginia Conservation
Legacy Fund.
The struggles met coal companies are facing bear out
in the data. According to Doyle Trading Consultants
LLC, which covers the global coal trade, met coal
production in the country’s prominent Central
Appalachia region fell 20.8 percent in the second
quarter of 2015, year on year.
The export price of U.S. met coal fell to $93 per short
ton in the second quarter of 2015, compared with
$97.30 in the second quarter of 2014, according to
data from the U.S. Energy Information Administration.
Things have not been going much better for U.S. iron
ore, as Cliffs Natural Resources Inc., Cleveland, the
country’s premier supplier of merchant iron ore pellets,
produced 14.9 million tons of pellets in the first nine
months of 2015, compared with 16.2 million tons in the
same period of 2014.
Cliffs, citing low U.S. steel production caused by an
influx of imports, idled two of its mining operations in
Minnesota during 2015, both extending into the new
year. “The historic high tonnage of foreign steel
dumped in the U.S. continues to negatively impact the
steel production levels for our domestic customers,”
Lourenco Goncalves, Cliffs’ chairman, president and
chief executive officer, said in November following the
idling of the company’s Northshore Mining operation.
With the challenges of 2015 still fresh in everyone’s
memory, a rebound in 2016, for both iron ore and met
coal, isn’t strongly supported. “Most analysts now,
including many observers in our industry, believe it is
unlikely that 2016 will see stronger markets for coal or
that the current oversupply can be significantly
alleviated,” Luke Popovich, National Mining
Association (NMA) vice president of external
communications, told AMM.
“Export markets are also likely to remain depressed for
much of the new year as the European Union edges
into recession and China and India continue to
underperform. At the same time, the industry is in the
process of aligning with changing market conditions,
closing higher-cost operations and, unfortunately,
shedding payroll.”
Joseph Poveromo, president at Raw Materials &
Ironmaking Global Consulting, said that the global iron
ore market weighs heavily on the 2016 domestic
forecast. Aside from the world’s biggest iron ore
producers (Rio Tinto Plc, Vale SA, BHP Billiton Ltd.
and Fortescue Metals Group Ltd.) increasing capacity
and production in 2015, the big takeaway from the
year, according to Poveromo, was the significant
decrease in China’s iron ore production, causing global
prices to crash lower than most could have predicted.
“A lot of contracts are tied to the world price indexes,
so it all ultimately weighs on domestic prices,”
Poveromo said. “It’s a big negative and there will be
pellet oversupply as well, particularly if North American
hot metal demand does not pick up significantly.”
Poveromo said that hope for iron ore, and the steel
industry it supplies, could come in the form of positive
trade cases against the alleged dumping of foreign
imports, but that pellet oversupply should be an issue
for most of 2016. He noted one outlier, however, with
regard to the market demand for direct-reduced
‘Raw’ deals helped to create the
perfect storm in 2015
2016 Metals Outlook – Raw Materials #1

(DR)-grade pellets, due to the Samarco Mineracao SA
disaster in Brazil that has led to a tightening in global
supply.
The arena of direct-reduced iron (DRI) is one that
Cliffs ventured into in 2015, shipping its first trial
program of 60,000 DR-grade pellets out of Northshore
in October to DRI facilities in the United States. “We
remain very optimistic about this opportunity, and
believe that there is a real demand from electric-arc
furnace steelmakers for alternative iron units to meet
the chemistry and residual requirements of
higher-quality steel products,” a Cliffs spokeswoman
told AMM.
With regards to Cliffs’ venture into DRI, Poveromo
noted that current demand for ore-based metallics,
such as DRI and hot-briquetted iron (HBI), is mostly
limited to flat-rolled steel plants that need a certain
percentage of the materials for chemistry, and that the
demand is fairly fixed among the country’s active
electric-arc furnaces.
The challenge for Cliffs, in 2016 and beyond, will be to
find a strategic partner to build a DRI plant on the Iron
Range in Minnesota, to facilitate the need for its
growing DR-pellet supply.
Cliffs has publically stated its need for a
complementary partner that would provide start-up
capital, a project site/infrastructure, natural gas and
steelmaking capabilities to support such a venture.
For any of the industries tied to steelmaking to emerge
through the headwinds, it will take a major impact in
the form of trade reform, according to several
companies throughout the supply chain.
“While our customers will generally benefit from lower
raw material input costs, the combination of a strong
U.S. currency and unfairly traded steel imports is more
than offsetting this benefit,” Mike Hardesty, senior vice
president of commercial operations, business
development, terminals and international coke at
SunCoke Energy Inc., told AMM.
“We are hopeful that the U.S. government will act
quickly to implement appropriate countervailing and
antidumping duties on unfairly subsidized steel
products in the next few months to protect a strategic
segment of our economy.”
DAN ISRAELI

“Dealers are very concerned
about flows. Generally this is
the time of year when
volumes dip a bit ... but the
truth is volumes have been
dipping throughout the
summer months compared
to last year,” one supplier
source said.
As aluminum scrap consumers wrapped up
purchasing for December, they began buying material
for January 2016 at steady price levels, sources told
AMM.
“It seems that scrap prices have leveled off (and we’re)
done with scrap requirements for December. (We) will
continue to buy and build inventory for the first
quarter,” one consumer said.
“We are holding ... until we see what January brings,” a
second consumer said. The stability in aluminum
scrap prices comes despite a drop in London Metal
Exchange pricing, with market participants noting that
slower scrap flows into dealers’ yards are providing
some support to prices.
“I don’t think scrap prices will go a whole lot lower. The
inbound flow to dealers is still off, and secondary
smelters still need to melt, albeit not as much,” a third
consumer said.
But fears remain that the aluminum scrap market could
continue to be weighed down by steep declines in
primary metal prices and weak consumer demand.
“Aluminum scrap prices continue to drift lower. Mills
are continuing to fill up quickly, if you can find any
takers at the moment,” one supplier source said.
“The market is still under pressure and the (London
Metal Exchange) keeps falling slowly,” a second
supplier source said.
Meanwhile, International standards are being
developed for recycling nonferrous metals from
aircraft, with two trade groups leading the charge for
new best practices for end-of-life aircraft recycling.
The Las Vegas-based Aircraft Fleet Recycling
Association (AFRA) and the Montreal-based
International Civil Aviation Organization (ICAO) both
have best practices at the top of their agenda.
While no specific compulsory standards are used yet
in recycling aircraft metals, an AFRA report has set out
minimum standards and best practices for every
aspect of the dismantling and recycling process,
ranging from the disassembly facilities themselves,
processes and material storage to worker training and
process management.
There are rich nonferrous pickings available as 75 to
80 percent of modern aircraft are made from
aluminum, with copper and titanium also widely used,
according to Kahina Oudjehani, design for
environment lead at Montreal-based Bombardier
Aerospace.
“The metals that are recovered from used aircraft will
use the same recycling routes as metals recovered by
other industries (vehicles, trains, cans, etc),”
Oudjehani said. Any parts with an economical value
on the secondary market would be removed and
carefully checked for recertification under relevant
maintenance standards, and all nonferrous metals
used can be recycled.
STAFF REPORT
Drops in prices may have reached
bottom of market
2016 Metals Outlook – Secondary/Aluminum #1

Copper, like many other
metals, saw prices tank
this year, plummeting
more than 30 percent
from late 2014 to levels
not seen since the 2009
recession.
Pricing volatility, lower demand and financial
uncertainty have dominated the copper industry’s
landscape in 2015, and 2016 is shaping up to be no
different.
Producers of the red metal have been forced to react
accordingly. Some of the world’s largest copper
miners—including Glencore Plc, Freeport-McMoRan
Inc., Asarco LLC and Rio Tinto Plc’s Kennecott Utah
Copper Corp.—have cut and curtailed output,
shuttered mines and greenfield projects, laid off
workers and trimmed operating costs in the pursuit to
stay viable and bring supply fundamentals closer to
balance with demand.
Some producers, including BHP Billiton Ltd., have
managed to resist the cuts, but it’s likely that more
production will come offline in 2016, Matthew
Wonnacott, senior consultant of copper demand and
markets at London-based CRU Group, said. “The
copper price will fall despite the fact that the
fundamentals are not in a terrible place,” he said.
“We’re looking at the second year of weak demand
growth.”
Indeed, the worst is still potentially to come for copper
prices, according to Barclays Investment Bank
commodities research analyst Dane Davis. “You can
make rational arguments for recovery in the copper
price, but the data has yet to support these
arguments,” he said. “There’s room for recovery, but
we’re not there yet.”
Some analysts are more optimistic. John Mothersole,
director of research at Englewood, Colo.-based IHS
Inc., believes that more supply cuts will have a positive
impact on prices. “My gut tells me this give and take of
supply and demand will circle back around, and we will
see another round of supply that will pull the market
back into deficit...prices will likely rise a bit next year
despite the evident correction that we’re going through
now.”
Caroline Bain, senior commodities economist at
London-based Capital Economics Ltd., also believes
that negative sentiment has been overstated, blaming
languishing copper prices on the exaggerated negative
outlook for commodities in general and concerns
about Chinese demand. “The fundamentals are
actually starting to improve,” she said. “It may take
some better news on China’s manufacturing sector to
turn sentiment around, but that should not be too long
in coming either.”
The International Copper Study Group is remaining
positive, too, predicting that global refined copper
supply and demand will move into a small deficit in
2016, as consumption is expected to outpace
production by about 127,000 tonnes. “Although a
downward revision has been made to global usage in
view of lower-than-anticipated growth in China, larger
downward adjustments have been made to production
as a result of recent announcements of production
cuts,” the Lisbon, Portugal-based group said.
Still, the industry is continuing to brace for rockiness.
“There is a lot of concern in the industry about when
things will turn around,” David A. “Skip” Hartquist,
president of the Copper & Brass Fabricators Council
Inc. (CBFC) and partner at law firm Kelley Drye &
Warren LLP, said.
That’s why CBFC, which represents copper and
copper alloys fabricators, plans to monitor and support
several initiatives next year, including developing
protections against currency manipulation, according
to Hartquist. The practice, particularly prevalent in
China, basically gives foreign producers a subsidy in
terms of their own pricing practices, Hartquist said.
China’s currency manipulation, coupled with the fact
that many Chinese companies are government-owned
and thus subsidized, has created a potent combination
of factors for copper mill products manufacturers, as
well as their scrap and cathode suppliers.
Copper country faces volatility
heading into new year
2016 Metals Outlook – Copper #1

“Although the Chinese argue that they’ve adjusted their
currencies to remove the advantage, we think that’s
absolutely not the case,” Hartquist said. “We’re
monitoring very carefully the products the council’s
members make to determine whether there are any
actions we should take more aggressively to deal with
what we think is widespread dumping and substantial
subsidies.”
Copper fabricators like ABC Metals Inc., a brass,
copper and copper alloy strip service center based in
Logansport, Ind., is also carefully watching European
competitors. Europe, which made significant
investments in the now-softening Chinese economy, is
looking toward the United States as an important
alternative, particularly as the strong U.S. dollar offers
favorable exchange rates for foreign manufacturers,
according to ABC Metals’ president, Daniel Kendall.
“Europe is looking at the United States and it’s
becoming increasingly important to them as (the
Europeans) see their investments in China become
less robust,” Kendall said. “I’m not worried about
vulnerability for current work being taken away. I’m
worried about new work being in a more competitive
situation.”
CBFC also plans to focus on mounting environmental
issues facing the copper industry in 2016.
“Environmental work has been taking an increasing
share of our budget over the years,” Hartquist said.
The council is aiming to get Congress to repeal or
replace the U.S. Securities & Exchange Commission’s
conflict minerals reporting rule, which requires U.S
Stock Exchange-listed companies to trace their
sources of minerals and disclose whether they are
sourcing tin, tungsten, tantalum or gold from the
Democratic Republic of Congo (DRC) and African
Great Lakes region. The four metals can be used in
copper alloys.
As for good news, looking
beyond 2016 yields a
more positive outlook.
“2016 is likely a year to
forget...but taking a
cautious view on copper
demand still gets us into
a supply deficit by the
end of the decade,”
CRU’s Wonnacott said.
“The world will still need
copper goods.”
“Unfortunately, the law has been ineffective, very
expensive and counterproductive to the interests of the
people it was designed to help,” Hartquist said. “It’s
costing business billions of dollars, but instead of being
able to identify which mines are not providing money to
the (local) militias, the buyers of the four minerals just
shy away from buying from anyone in that region. The
law hurts both the good guys and the bad guys.”
GRACE LAVIGNE

Even though LME stocks
continue to fall “it sure
isn’t reflected in the
nickel price,” one nickel
supplier told AMM.
While most base metals were underwhelming in 2015,
perhaps none underperformed as much as nickel. As
is often the case, nickel’s plight has come down to the
most basic of economic principles: supply and
demand; oftentimes, the global market is flooded with
material.
“I think that if the nickel market were a horse, we’d
have to shoot it,” a supplier in the nickel market said.
It has been a tumultuous year for the global nickel
market. A whirlwind of economic factors—including
supply-and-demand dynamics and, perhaps most
critically, a depression in the energy market—pushed
prices to lows not seen in some time.
The effects have been felt by a multitude of industries,
ranging from the primary nickel producers who depend
on decent prices to turn a profit to the stainless steel
scrap suppliers whose margins depend on the intrinsic
value of the material. No one knows for sure how
things will shape up over the next 12 months, but one
thing is certain: It will continue to be a wild ride.
Spot nickel premiums remained steady in North
America in early December as a drop in London Metal
Exchange nickel stocks globally had yet to be reflected
in U.S. warehouses.
AMM’s assessment of the melting-grade nickel
premium was steady. Global LME nickel stocks were
at 400,992 tonnes at the start of business Dec. 3, the
lowest point this year after peaking at 470,376 tonnes
in early June. However, nickel stocks at LME
warehouses in the United States have actually
increased over that period, with the Baltimore
warehouse holding 3,390 tonnes of nickel as of Dec. 1
vs. 1,542 tonnes on June 3.
High-volume spot inquires in North America have been
scarce, with most business conducted for drum or
pallet quantities, market participants said. Most
sources suggested that the market is unlikely to
emerge from its slump in the short-term outlook.
Haynes International Inc. is upbeat on the prospects
for 2016, anticipating increased demand from natural
gas producers, along with strong construction and
automotive markets. Lower nickel prices are expected
to have a negative impact on operations, especially for
inventory acquired during periods of higher pricing. But
since the aerospace industry appears bullish, Haynes
might be able to offset the nickel impact with products
geared to specialist applications, president and chief
executive officer Mark Comerford said.
The company’s net income jumped more than
eightfold during the fiscal year ended Sept. 30 despite
weak oil and gas markets, falling sales volumes and
struggling commodity prices, notably for nickel.
Aerospace and specialty applications were cited for
the strong performance, with the volume decline offset
by increased pricing for specialty metals.
Bu Vale SA plans to downsize its Sudbury, Ontario,
operations to a single furnace and eliminate copper
smelting, and will cease nickel smelting and refining
operations at its Thompson, Manitoba, facilities by the
end of 2018.
Concentrate produced at Thompson will be processed
at Sudbury and Long Harbour, Newfoundland and
Labrador, Vale’s executive director for base metals,
Jennifer Maki, said at the company’s investor day
conference at the New York Stock Exchange.
The Thompson smelter and refinery will be
decommissioned in accordance with previously
announced closure plans, the company said. Some
500 positions will be eliminated, but Vale said it has
been transitioning workers to other posts in its mining
and milling operations since 2012 and is halfway
finished. To fill the void, the company has hired new
workers who have been contracted until the end of
2018.
Continuing its plan to cut production and operational
costs, Rio de Janeiro-based Vale will transform
Sudbury into a single-furnace facility and ramp up
operations at Long Harbour, a move expected to be
completed by the end of 2018.
Low demand, low prices, high
inventories hit the sector
2016 Metals Outlook – Nickel #1

Sudbury will focus solely on smelting nickel,
eliminating copper from its operations, a company
spokesman told AMM via e-mail in December. Copper
previously processed there will instead be sold at the
milling stage as copper concentrate, Vale said. The
copper circuit used to produce copper anode in the
Sudbury smelter will be removed, resulting in operating
cost savings of $50 million.
Vale also is looking to increase the amount of locally
produced nickel ore to be processed at the Sudbury
facility as it is more profitable than outside material.
Vale has set a goal to reduce supply and services
costs at Sudbury by $25 million in 2016, Maki said.
Meanwhile, Vale plans to continue its ramp-up at Long
Harbour, with a target of feeding the facility exclusively
with material from its Voisey’s Bay operations by the
end of this year instead of using the current blend,
which includes stock from Indonesia. This will result in
a purer nickel product, Maki said.
The plant’s expected 2015 output of 10,000 tonnes of
nickel should double next year, Maki added.
Overall, Vale’s nickel production increased by 25
percent from 2012 and copper production increased by
55 percent, while costs fell by 35 percent for nickel and
by 64 percent for copper, she said.
Synalloy Corp. believes the bottom has been reached
for its metals and pipe business even as third-quarter
results still reflected a depressed market.
“The orders for tank and seamless pipe have bottomed
out,” Craig Bram, president and chief executive officer
of the Spartanburg, S.C.-based company, said during a
Nov. 9 earnings call.
While low nickel prices continue to drain inventory
value, Synalloy’s top executive was hopeful of a
recovery.
“We have received more inquiries of stocking
buys—not quite as large as what we typically see, but
larger than the prior two quarters,” Bram said. “I would
attribute that to our dumping suit.”
STAFF REPORT

Service centers are on the frontlines of the difficult
battles currently facing the steel industry.
As distributors, they stock, sell and even have to
process the material firsthand to the people who need
it. Lately, however, service centers said their
customers, and consequently they themselves, are
feeling the pinch.
Looking forward to 2016, service centers are hopeful
there will be some improvement in the economic
environment for many industries that buy from them.
But this improvement may not be felt right away and
may only manifest in the second half of the year.
“Honestly, 2016 is still very murky. We’re still adjusting
since it felt like we were on a treadmill for a long while,”
Brian D. Robbins, chief executive of Perry, Ohio-based
MidWest Materials Inc. and president of the
Association of Steel Distributors, said.
Market sources are also seeing better growth “after the
first quarter.”
Some service centers were hit hard by the downturn in
the oil and gas industry and have had to either close
down sites or consolidate operations in order to trim
costs.
“(Service centers) are surviving unless they have
unruly debt burdens or overexposure to oil and gas,”
according to Philip Gibbs, vice president and equity
research analyst with Keybanc Capital Markets Inc. in
Cleveland.
The good news is there are bright spots.
The automotive industry is one of the stronger
end-markets for service centers. Component makers
and fabricators often order steel or other metals from
service centers. It’s expected that the automotive
industry will grow 10 percent over the next five years,
according to expert estimates.
Service center owners are not just looking at the
automotive industry to keep demand for steel up; many
are hoping it will also help buoy business for
aluminum.
Non-residential construction is another bright spot,
though one that is slightly muted. Service centers are
confident stadiums, schools, hospitals and mall
projects will be strong in the coming year. If the
highways bill comes through, and there is more budget
allotted to new roads, demand for steel for
infrastructure will also push more business toward
service centers who often sell the materials used to
fabricators.
Many service centers also point to aerospace as a
potential growth area, particularly for specialty alloys
or products like titanium, stainless steel and aluminum.
Part of the challenge service centers are facing is the
low-price environment in steel and most other metals.
Demand is stable, if not outright strong, as evidenced
by the prognosis for some end-markets. But some
distributors claimed customers are choosing to sit on
the sidelines, waiting for prices to further drop before
buying more material.
In the meantime, some service centers have looked
into providing more value-added services to keep
profits up. Reliance Steel and Aluminum Co., Los
Angeles, for example touts the strength of its toll
processing business for the automotive industry.
Toll processing allows companies to take in steel or
other metal and process it without the pricing
uncertainties involved in housing the material as
inventory. Since there is no need to keep the metal, toll
processing is not susceptible to pricing fluctuations
that is the new norm in the market.
For much of the year, service centers have had to deal
with high inventories and struggling customers, making
it hard to keep costs down and balance sheets stable.
Inventory and shipment data released monthly by the
Rolling Meadows, Ill.-based Metals Service Center
Institute (MSCI) painted a very bleak picture of 2015,
with very little to celebrate in the next year.
Shipments from U.S. service centers dropped 7.2
percent as of October to 34.2 million tons, compared
with 36.9 million in the same period in 2014, based on
data from MSCI.
Inventories also increased 7.4 percent to 93.8 million
tons vs. 87.4 million tons.
Many of the end-markets traditionally served by
service centers have had a pretty difficult 2015 as well,
making selling to them that much harder.
What makes service centers unique is that their
strength depends on the long-term prognosis for their
end-markets.
Customer demand center of the
action for distributors
2016 Metals Outlook – Service Centers #1

Service centers, at the close of 2015, may still have
some of the leftover inventory levels hampering the
business, but the good news is that for the coming
year that level is expected to drop to more manageable
levels.
“(The) good news relative to 2008, early 2009 is that
inventory is turning. There is velocity, which helps to
offset the dramatic pricing declines,” Gibbs said.
Some service centers, though, have not been as
fortunate and will face a far more difficult 2016 after
filing for bankruptcy protection.
Novi, Mich.-based Lee Steel Corp.; Ferndale,
Mich.-based Impact Steel Inc.; and Anderson,
Ind.-based S&S Steel Services Inc. have filed for
bankruptcy. Of these, Lee Steel has been sold to a
private investor.
Bigger service centers such as Reliance and other
listed companies continue to seek new investment
opportunities in the market to expand. In fact,
consolidation was a buzzword for 2014 and it was
largely expected that there would be more in 2015
continuing until the next year.
But consolidation has largely slowed down in 2015
mainly due to the reluctance of some service centers
to sell their businesses for far less than they are worth.
Market sources are also certain some service centers
will be able to continue doing business because they
can get low-interest credit lines.
But many in the market, and analysts, assume that in
the coming years there might be more opportunity for
service centers to offer themselves up for sale to one
of the bigger companies.
EMILIA DAVID

From the mill side,
several buyers said
prices fell as hard as they
did because of
oversupply. This argued
that mill demand was hurt
severely by a number of
converging factors.
Despite the ferrous scrap market settling with the
near-unanimous acceptance of a $20-per-gross-ton
increase on most grades in most regions for January,
the challenges of the past year still haunt sellers in the
sector.
An Alabama source said, “I think the scrap price finally
reached the point in November and December where it
just stopped flowing as it should into dealers’ yards,
and they just didn’t have as much to sell this month.”
Still, the bump is more a result of consumers filling
inventory after the holiday doldrums than it is a
resurgence in U.S. steel production, according to
multiple local suppliers.
“Unfortunately, I see it as restocking,” one
Cleveland-based supplier said. “I would love to think
there were legs to this, but with more operating days in
January compared to November and December, when
mills were required to take inventories down, you see a
lot of them in rebuying mode.”
The market rose higher than expected due to strength
in the South and big suppliers’ push, according to one
Cleveland-based consumer.
But with ferrous scrap prices still languishing at the
lowest levels they have been since the Great
Recession, dealers and brokers had a rough go of it in
2015. Interestingly, 2015 marked the second straight
year that prices were lower at the end of the year than
at the beginning, and the fourth in the past five. The
highest scrap values for the year also occurred in
January in each of those years.
Why did scrap value decline so dramatically? A
combination of the plunge in global commodity prices,
a stronger U.S. dollar and a slowdown in China’s
economy are among the challenges faced by the scrap
industry. But two other more direct factors are at play
as well – chronically low capacity utilization rates at
mills and an anemic export market are hurting
demand.
The bulk of those losses occurred exactly one year
ago, when markets nationwide cratered in February,
dropping $90 or more in many of the most active
markets. 2015 markets stabilized somewhat in spring
and early summer before a sustained fall during
September, October, and November and a leveling in
December.
A number of factors converged to bring the market
down more than had been seen in over five years.
Much of it had to do with factors that have an impact
on mill production, although some were also related to
supply levels, which mill buyers found to be more than
adequate.
These included a strong U.S. dollar; high levels of
imported steel, which came in at prices much lower
than domestic products; the sharp drop in oil prices,
which adversely affected pipe and tube makers; a drop
in steel prices; Canadian scapyards dumping
materials; the continuing stagnant performance of
ferrous scrap exports; lower prices of iron ore, which
helped pushed prime grades down.
While it’s true that the dramatic decline in ferrous scrap
prices throughout most of 2015 has at times
contributed to a scarcity of available material, it also is
true that the nosedive in demand that helped create
the issue in the first place has more than offset any
shortages.
Both export needs and mill demand for scrap from
dealers and brokers plummeted last year, continuing a
four-year trend downward. In fact, total demand for
Bump in the road
Scrap starts 2016 with a rare up market, but the mood of sellers is still dampened
by several continuing negative factors.
Demand drove down market in 2015
Trending in Scrap – Ferrous #2

MARKET TREND
Although January
rebounded at the start of
2016, scrap prices have
been moving in a
downward direction for
most months since
seeing a historic decline
exactly one year ago.
scrap from domestic producers, sellers and brokers is
at its lowest point since the Great Recession began in
2007 – and since the extra push it got in 2008 from the
collapse in the financial and metals markets.
In fact, the total export and domestic mill consumption
of scrap purchased from sources outside the mills was
roughly 55 million tonnes, if estimates based on
numbers through the first three quarters of 2015 hold
up until the end of the year.
It should be no surprise then that scrap prices fell
severely last year, and in fact have been roughly
sideways or down on an average annual basis every
year since the drops in demand and consumption
began after the post-recession high of 77.5 million
tonnes in 2011.
Total export and domestic mill demand for 2015 was
forecast to be about 71 percent of what it was just four
years prior. Not coincidentally, average annual prices
for 2015 finished about 47 percent lower than average
annual prices in 2011.
Mills are running at low productivity (rates were low
again in early January), and the demand for domestic
plus export scrap remained historically weak:
0
10
20
30
40
50
60
70
80
90
TonnesPurchased*
*In million tonnes, 2008-2015
Year
2008(77.9)
2009(66.2)
2010(70.9)
2011(77.5)
2012(73.3)
2013(63)
2014(59.8)
2015(55.3)
Source: U.S. Commerce Department; U.S. Geological Survey

Even with resumed operations,
scrap’s rise is a key to supporting
Nucor DRI plant’s success.
Ferrous views
Nucor Corp. was scheduled to resume operations at
its direct-reduced iron (DRI) plant in Louisiana by the
end of January, after market sources had said the
steelmaker previously stated that ferrous scrap metal
prices would need to increase by at least $100 per
gross ton before it would make business sense for the
steel firm to consider resuming production at the
facility in St. James Parish.
“Nucor’s raw materials strategy is built on flexibility,
with the company constantly evaluating the market for
the lowest-cost raw material inputs at the quality levels
our customers need,” the Charlotte, N.C.-based
steelmaker said Jan. 6. “Changes in the raw materials
market led to the decision to restart plant operations.”
Nucor Steel Louisiana was temporarily idled for
planned maintenance in December, with the company
noting that it would not resume operations at the
$750-million DRI plant until market prices for
alternative raw materials improved.
The St. James Parish plant got off to a slow start due
to an equipment failure in 2014, which put the DRI
operation out of commission until late in the first
quarter of last year.
Nucor announced its intent to build the $750-million
DRI plant in 2010, but a physical structure accident
and environmental permit issues resulted in delays.
At the time of the first shipment, AMM’s price
assessment for No. 1 busheling in Chicago was at
$430 per ton. Ferrous scrap prices across all grades
have since tumbled more than 60 percent, with
domestic busheling prices in Chicago and Alabama
settling at $160 and $173 per ton, respectively, in early
December.
Logic would seem to dictate that the price of busheling
in Alabama should increase since it is an alternative
raw material to DRI, analysts said.
However, recent history has shown that this might not
be the case. When the St. James Parish plant’s
production was disrupted by a gas heater failure in
November of 2014 it did not result in higher scrap
prices. Instead, the No. 1 busheling price in Alabama
fell 33.7 percent to $260 per ton by Feb. 6, 2105 from
$392 per ton Nov. 3, 2014, according to AMM’s pricing
archives.
“With scrap prices so low, a long-term outage could
spell increased demand and prices for prime scrap,”
according to a source at one Alabama broker who sells
the material. “People are sitting on scrap, so whatever
is in the pipeline will have to dry up before you see
busheling move up because the DRI plant is down.”
The Alabama, Arkansas and Tennessee scrap
markets would benefit from the direct effects of a
Louisiana idling as the plant feeds Nucor’s river mills,
while Nucor’s Trinidad and Tobago DRI facility caters
to its mills near the Atlantic coast such as Darlington,
S.C., and Hertford, N.C.
The dynamics of the DRI outage were much different
than when Nucor had its gas heater outage, according
to a source at one Mississippi recycler who sees
prices increasing for all grades of scrap.
“Shred is already selling at $175 (per ton). The
(current) prices have choked off flow. Inventories at
mills are shrinking and mills are looking for new
vendors as some guys can’t perform,” he said. “If there
is even a little more demand for scrap or if busheling
from industrials starts to slack, they (mills) will have to
increase their buys of obsolete grades because they
can’t melt dirt.”
When Big River Steel LLC, Osceola, Ark., becomes
active in the market it also could motivate future Nucor
decisions concerning its DRI plant, a southern recycler
source said. “When Big River comes on ... there will be
more consumers of scrap and they will have to pay a
premium on it.”
“With value-in-use differences and penalties assigned
for the increased costs to melt DRI … (I would say)
$275 to $300 (per ton for No. 1 busheling) delivered to
their mills,” one raw materials source had said in
December when asked how the pricing and economics
of raw materials would impact Nucor’s business
decisions with regard to DRI production.
Noting that DR-grade pellets trade at about a
7.5-percent premium to iron ore, the source estimated
Nucor’s cost of production at about $200 per ton on
the low end, not including freight to the mill.
AMM sister publication Metal Bulletin’s 62-percent
metal content iron ore index is $40.80 per tonne
delivered to China. Meanwhile, U.S. pig iron prices are
in a range of $190 to $200 per tonne into New
Orleans, one southeastern trader source confirmed.
The Charlotte, N.C.-based steelmaker announced
plans in December to temporarily idle Nucor Steel
Louisiana LLC, citing low raw material prices as the
catalyst for its decision. The company at that time did
not indicate how long it intended to idle the facility and
did not respond to a request for comment. The outage
came close to two years after Nucor made its first DRI
shipment from the Louisiana facility.

Austenitic stainless steel scrap shipments to
consumers must be more complete in today’s market
than ever before. On the supply side of raw materials,
the need for nickel, chrome, and iron units must come
from more than just stainless steel scrap alone.
The electric-arc furnace (EF) does not care where the
intrinsic values come from as long as the final product
meets the required analysis per the customer
specifications. This is where the art of blending is
critical when it comes to the required quality control.
As steel mills turned to the electric-arc furnace, the
need for scrap increased substantially since an EF can
melt up to 100-percent scrap as opposed to a blast
furnace that could only use about 30-percent scrap.
With this new cost-saving technology, there was a
tremendous need to utilize scrap metal for these
furnaces.
Over the years, there has been a strong working
relationship between the scrap processors and the
consuming steel mills. The need to continually find
ways to cut costs has created an ongoing relationship
throughout the industry.
“What we might not have allowed in the past, is now
part of our regular melt charge,” one consumer said.
One good example of this change is through the use of
turnings. Turnings were not allowed because the
metallic yield could not be accurately determined. The
metallic yield or actual metal produced is an extremely
important part of the production process.
With new technology today, these yields can be
properly determined and turnings are allowable to
certain maximum limits.
There is also the use of bundles. Compressing
stainless into bundles helps the density of a charge
into the furnace, which is very important in stainless
steel melts since stainless has a tendency to be bulky.
Density is important since the consuming mills want all
melts done using only two buckets to complete the
total charge.
Bundles in the past have been taboo because of the
suspicion of what was inside the bundle. However, the
mills today have the ability to contain scrap supplier
shipments for total accountability and complete quality
control.
There is a limit as to the number of bundles allowed in
shipments since they can be the cause of broken
electrodes, which can interrupt the melt, and the cost
of the electrodes is very expensive. There are specific
size requirements for all scrap that must be adhered to
as well.
Because there are so many elements used in the
making of austenitic stainless steel grades, there are a
number of those that can be the cause of high
penalties if they are not properly accounted for. Copper
is the most common problem and the general limit for
copper in any heat is 0.50 Max. Cu.
One falsehood among many is that molybdenum is a
good thing. It is a good thing if used in
molybdenum-bearing alloys, but in the case of 304, by
example, it is a penalty.
Honing the art of blending
stainless steel scrap
As steel mills turned to the electric-arc furnace, the need for scrap increased
substantially since an EF can melt up to 100-percent scrap, as opposed to a blast
furnace that could only use about 30-percent scrap. With this new cost-saving
technology, there was a tremendous need to utilize scrap metal for these
furnaces.
Trending in Scrap – Non Ferrous #2
Scrap blending is highly
technical and requires
complete knowledge of the
scrap materials as well as how
the material will be processed
and melted. It is extremely
important to understand all the
major components as well as
the residual values that are
inherent in all metals.

There are many details to the art of blending and those
details impact what is allowed and what cannot be
used in the blends. This impact flows over to the
marketing or buying department and dictates what
should be purchased. It also provides a guide for what
not to buy. This is an important list since it further
organizes the supply chain management side of
proper inventory levels.
The real heart of any blending program gets to the
cost of the components used. The value of nickel in a
low alloy is not the same as the value of nickel in a
higher nickel alloy. Further to this, an alloy containing
nickel, even high amounts of nickel, that might contain
copper, or cobalt, or some other constricting element,
will have less value since it can only be used on a
limited basis.
As blends are put together, all these restrictions must
be analyzed and calculated to determine what can be
used, how much can be used, and what materials will
not work in that particular blend. Keep in mind that as
materials purchased that cannot be used now must be
held in inventory. Managing these costs is a critical
component of the profit stream.
JAMES LAWRENCE
MARKET TREND
Despite an increase
during the last week of
2015, stainless scrap
has been down overall
for a good portion of the
past year, with no real
upward bump during the
few weeks of the early
2016 markets.
The latest on UBCs, aluminum,
copper and other nonferrous metals
shows mixed performances to start
the year.
Non Ferrous views
UBC prices get a lift as competition heats up
The used beverage can (UBC) scrap market is heating
up as a bump in London Metal Exchange aluminum
prices and increased competition for the material push
tags higher.
UBC prices on a picked-up basis have risen to 58 to
59 cents per pound from 56 to 58 cents previously,
reaching levels last seen in mid-October.
Despite the year-end slowdown and seasonal
maintenance outages throughout December,
competition to secure a steady flow of UBCs for
January delivery is increasing, according to market
participants.
“Some consumers (are) not buying in December
because it is the end of their fiscal year and they are
drawing down inventories. To counter that, they may
offer a higher price for January delivery than what
others are paying for December delivery,” one
consumer source told AMM.
Availability key to aluminum scrap recovery
Aluminum scrap prices are expected to stabilize in
2016 as waning scrap flows choke market supply,
according to suppliers.
Still, any turnaround in prices might not be realized
until the second half of 2016.
This year, the scrap industry has been plagued by a
plunge in global commodity prices, a stronger U.S.
dollar, chronically low capacity utilization rates and a
slowdown in China’s economy, among other
challenges.
“I believe there are a lot of factors that point to
stabilized higher aluminum pricing in 2016. ... Pricing
and volatility seem to be more and more unrelated to
key economic factors in this country but (instead
related to) worldwide factors,” one supplier told AMM.
Primary aluminum prices have been hovering near
six-and-a-half-year lows, pressuring mill-grade scrap
tags.
Copper scrap demand fizzles, prices flat
Copper and brass scrap markets have started the year
slower than expected as weak domestic demand
continues to mitigate the effects of a tightening in
supplies.
“It appeared that metal was starting to move and
perhaps there was slightly stronger demand, yet (in the
early part of this week) some of the major mills moved
deliveries back. ... It still seems as if ingot makers are
only buying to their needs as opposed to buying a
general flow of metal,” one supplier source said.

From January to
December 2015, no. 1
heavy melting, shredded
scrap and no. 1 dealer
bundles prices declined
$155 to $190 per ton
delivered to consumers.
A good portion of the
blame for those losses fell
onto the anemic ferrous
scrap export market.
Twelve months of turbulence rained down on
participants in the global scrap arena in 2015. The year
was marked by an ongoing struggle with price
degradation, fallout from the increasing strength of the
dollar and the challenge of surviving a major
demand-supply realignment.
Domestically, that meant that those sellers who had
depended in recent years on export business to either
take additional scrap off of their hands or, in a playing
out of supply-and-demand market dynamics, helping
to push up domestic prices through competition found
themselves struggling at year’s end.
Ferrous scrap exports for the first 11 months of 2015
fell by nearly 2.49 million tonnes to stand at 11.76
million tonnes. U.S. ferrous scrap exports sputtered
again in November, falling to the lowest level since at
least early 2008.
U.S. nonferrous scrap exports for the first 11 months of
2015 fell by 257,864 tons from the same period a year
earlier to 2,647, 654 tons. Aluminum scrap exports
retreated by 10,710 short tons in November compared
with the previous month, according to U.S. Commerce
Department data.
Meanwhile, U.S. exports of copper scrap were only
marginally lower in November, falling a mere 176 tons
compared with October.
“Export volumes declining is not unexpected; it’s the
strength of the dollar. If you laid U.S dollar exchange
rate data with export data you’d see a correlated
pattern,” one U.S. supplier told AMM. “Some buying
subsides at the peaks, but buying will resume if the
dollar weakens.”
A second U.S. supplier shared a similar view, noting
that the dollar’s strength has been a deterrent for some
buyers in India and Canada. A fall-off in shredding
activity over the past few months, due to weaker
ferrous prices, has reduced the available quantity of
scrap to export, he added.
On the ferrous side for November, Mexico, India,
Thailand and Canada took major steps back from the
market as trade volumes declined by 63,952 tonnes,
49,523 tonnes, 28,235 tonnes and 14,059 tonnes,
respectively, compared with October, according to U.S.
Department of Commerce data.
Meanwhile, U.S. exports of ferrous scrap to Japan,
Indonesia and Vietnam climbed in November,
increasing by 2,525 tonnes, 2,304 tonnes and 1,406
tonnes, respectively. Lower transaction prices failed to
lift sales to South Korea, which dropped by 5,320
tonnes, while shipments to Taiwan remained relatively
flat with a 787-tonne drop.
World weary
Ferrous and nonferrous scrap saw export tonnage figures and prices decline in
2015, hurting already wounded markets.
Trending in Scrap – Global #2
India tough to crack for US ferrous
scrap exporters
U.S. ferrous scrap exporters will need to overcome
various hurdles—including price, delivery time and
freight costs—in order to become more attractive
suppliers to Indian producers.
“India is not dependent on any one single major
exporter (for scrap),” Ved Prakash, director at Antwerp,
Belgium-based trading company Gemini Corp. NV, told
AMM. “If the prices are attractive, Indian buyers will go
to the U.S.”

0
5
10
15
20
25
ExportTonnes
Year
2008(21.5)
2009(22.4)
2010(20.5)
2011(24.3)
2012(21.4)
2013(18.5)
2014(15.3)
2015(13)
Annual ferrous scrap exports in million tonnes
Source: U.S. Commerce Department
Another disadvantage that U.S. exporters face is the
45-day freight time for shipments compared with closer
destinations such as the Middle East, which only takes
four days, and South Africa’s 10- to 12-day shipment
duration, he said.
U.S. exporters based in California also face a logistical
challenge posed by Indian buyers’ 20-foot container
requirement, which raises overall shipping costs.
“Ninety percent of the scrap exported from the U.S. to
India originates from the East Coast, largely in
containers,” Prakash said.
One thing many U.S. suppliers fail to understand is
how fragmented the Indian steel industry is—and its
impact on perceived market demand, he said, adding
that Indian buyers often “shop around” in order to
attain the lowest price possible.
“If one buyer needs 10,000 tonnes it will place an
inquiry to 10 trading companies, which will then check
the market. It will seem as though there is 100,000
tonnes in demand based on the total inquiries, but the
truth is there is only 10,000,” Prakash said.
Deemed a bright spot within the turbulent global scrap
market, India’s unique raw material consumption
dynamics make the country very flexible in its
response to global commodity prices.
“India is probably the only country that uses all raw
material in good equation,” Prakash said, noting that
Indian steelmakers produced about 90 million tonnes
of steel this year.
Of this total, about 50 million tonnes were produced
from iron ore, 20 million tonnes using direct-reduced
iron and 20 million tonnes from scrap.
“India consumes about 20.5 million tonnes of scrap per
year, of which about 6 million tonnes are imported
scrap,” he said.

While mill production was down in all regions during
2015, the South led the way in what became a
nightmare year for mill production and its attendant
demand for domestic scrap.
U.S. Steel Corp. has indefinitely postponed plans to
build an electric-arc furnace (EF) at its Fairfield Works
in Alabama.
Construction of the planned 1.6-million-net-ton EF at
Fairfield won’t resume “until market conditions
improve,” U.S. Steel said Dec. 21, citing high import
volumes and a deep downturn in the steel and energy
sectors.
In December oil prices have sagged to an eight-year
low and the U.S. drill rig count to a 16-year low, the
Pittsburgh-based steelmaker said.
U.S. Steel said it would to be able to meet customer
demand from the pipe mill at its Fairfield Works near
Birmingham, Ala., as well as its steelmaking facilities in
Indiana, Michigan and Pennsylvania. Fairfield Works’
No. 5 coating line and U.S. Steel’s Double-G hot-dip
galvanizing joint venture in nearby Jackson, Mich., also
will continue to operate, the company said.
Steel market heads South
As output shrinks regionally, U.S. Steel indefinitely postpones building an
electric-arc furnace at Alabama Fairfield Works.
Trending in Scrap – Regional #2
0
100
200
300
400
500
600
700
2012 2013 2014 2015
North East
Great Lakes
Midwest
Southern
Western
Nettons,inthousands
The move makes sense, given current market
conditions, veteran steel industry analyst Michelle
Applebaum told AMM. “There is plenty of upstream
capacity available for them to buy semis rather than
make them themselves. The timing just isn’t going to
work, so I think they are being smart and pulling back,”
she said.
The company decided in August to permanently close
several of its steelmaking operations in Fairfield,
including the blast furnace, hot strip mill, pickle line,
cold mill, annealing facility, and stretch and temper
line.
The steelmaker for years has discussed switching the
Fairfield Works, which supplies flat-rolled and tubular
products, to an EF operation. In 2014, it received board
approval to install the EF at Fairfield, and planned to
spend $277.5 million to build the EF and a tubular
products coupling facility.
But as steel and energy prices have fallen, U.S. Steel
has announced waves of layoffs over the past year,
most recently at its Granite City, Ill., steel mill.
The accompanying chart shows weekly averages by
region for steel production for recent years.

2016 Metals Market Outlook

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