Isri sept 2013 presentation

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  • Key International Ferrous Scrap Markets

    ISRI Chicago Commodities Roundtable Forum 2013

    17th September 2013 Jarek Mlodziejewski

    Senior Analyst

  • This document does not constitute an offer or solicitation to buy or sell any investment product(s). It does not take into account the specific investment objectives, financial situation or particular needs of any person. Investors should seek advice from a financial adviser before investing in any investment products or adopting any investment strategies. In the event that the investor chooses not to seek advice from a financial adviser, he/she should consider whether the product in question is suitable for him/her. The investment product(s) discussed herein are subject to significant investment risks, including the possible loss of the principal amount invested. Past performance of investment products is not necessarily a guide to future performance.

    Unless expressly stated, we do not make any representations nor give any warranties in respect of the information contained in this presentation. To the extent permitted by the applicable law, we hereby exclude all warranties, conditions, representations or duties whatsoever and howsoever arising (whether express or implied) including but not limited to any representations or warranties as to the ownership of intellectual property or other rights in the presentation, or the satisfactory quality, merchantability or fitness for a particular purpose of, any goods or services referred to at any time in this presentation, any express or statutory warranties, and any warranties or duties regarding accuracy, timeliness, completeness, performance, availability, lack of negligence or of workmanlike effort.

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    We take all such steps as are reasonably necessary to provide information that is accurate and reliable, but exclude to the fullest extent permitted by law any liability for the inaccuracy of the information in this report.

    The Steel Index (TSI) used all reasonable endeavours to certify the correctness of the information contained in this presentation.

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    Disclaimer

  • Agenda

    Introduction to TSI and our Methodology

    Scrap Update Key International markets o Turkey o India oAsia

    Scrap - New Opportunities in an old game

  • Coverage

    Steel Hot rolled coil* Cold rolled coil HDG coil Plate Rebar Stainless

    Regions covered

    USA* Asia Northern Europe* Southern Europe* Turkey India (coming soon)

    Iron Ore 62% Fe Fines* 58% Fe Fines* 63/63.5% Fe Fines* 62% Fe (2% Al) Fines*

    Scrap HMS 1&2 (80:20)* Shredded A3 P&S

    Regions covered

    Chinese imports* Regions covered

    Turkish imports* USA Indian imports Taiwanese imports

    Daily Indices Basis for cleared derivatives contracts

    Coking Coal Premium Hard

    Coking Coal Hard Coking Coal

    Regions covered

    Australia

  • TSI methodology

    Specialist price information service

    Impartial, mechanistic operation compiling spot prices for wide range of ferrous products

    Systematic, data-driven index methodology applied consistently world-wide

    Offices in Pittsburgh, Shanghai, London and Singapore

    Scrap indices published for US Midwest shred, Turkish HMS 80:20, Taiwanese and Indian shredded imports

  • Agenda

    Introduction to TSI and our Methodology

    Scrap Update Key International markets o Turkey o India oAsia

    Scrap - New Opportunities in an old game

  • $330

    $340

    $350

    $360

    $370

    $380

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    $410

    CFR Turkey HMS #1&2 80:20 US$/tonne

    Oversupply, weak steel markets, purchasing activities

    act to depress import prices in 2013

    PresenterPresentation NotesTough 2013, downward trend

    Market in oversupply up to June, too much scrap put pressure on the price, though it fell faster and harder than the US midwest market during the same period.Post June recovery, with a period of consistant buying from in the all the key markets, bringing some bullish behaviour up till August. As typical for Turkey however, the mills disappeared, leading to some weakness, which we can see now, moving in tandem with the US.May now be more economic to buy billet, as was the case around the middle of the year, this could once again lead Turkey to ignore the ferrous scrap market, with only a handful of scrap cargoes having gone through recently after a period of inactivity. Interestingly, with strengthening steel demand, Turkish mills have recently upped the buy price of local scrap.

    Weak import levels, down about 20% on an annualised basis, procurement of local scrap, however, was up 13.1%.

    India has offered more billet to the Middle East as the rupee has continued its slump, while Turkey's local currency has depreciated along with a host of developing markets on talk of an end to US quantitative easing. But Syria is the issue on most traders minds.

  • $300

    $350

    $400

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    $500

    $550

    CFR Turkey HMS #1&2 80:20 US$/tonne US Midwest shredded US$/tonne

    Source: TSI and Platts

    CFR Turkey tracks closely with US Midwest Prices. (Potential proxy for US Shred)

    Correlates very well with regional scrap pools such as

    the USA

    R2 Correlation 85%

    PresenterPresentation NotesMarkets move together, though lately it seems to be a question of Turkish mills waiting to see what will happen in the US before coming to the market. Recently there has been some weakness in western industries with steel production down on an annualised basis in Europe, the US and Turkey, whilst scrap flows havent seen any weakness to date, especially with the opening of more shredders in the US, seeing supply put some downard pressure on price.

  • $0

    $50

    $100

    $150

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    $250

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    US South East scrap conversion cost Turkey scrap conversion cost

    Rebar imports? Bad?

    The balance of payments is firmly in the favour of the US, to the tune of $2 billion in 2012

    PresenterPresentation NotesFact of the matter is that Turkey is able to more efficiently convert scrap to rebar, to the benefit of the American construction industry, with the balance of payment issued eased by Turkey importing millions of tonnes of US scrap. Taking into account the cost of importing rebar, and the revenue from exporting scrap, the US is 2 billion dollars in the green.

  • Agenda

    Introduction to TSI and our Methodology

    Scrap Update Key International markets o Turkey o India oAsia

    Scrap - New Opportunities in an old game

  • $300

    $350

    $400

    $450

    $500

    $550

    CFR India containerised shredded Sample of normalised data submissions

    Using CFR India as an example of the data submission process

    PresenterPresentation NotesIndia has offered more billet to the Middle East as the rupee has continued its slump, while Turkey's local currency has depreciated along with a host of developing markets on talk of an end to US quantitative easing. But Syria is the issue on most traders minds.

    Sluggish demand continued to pressure the market, but this years abundant monsoon rains led to talk of a revival in rural demand.

  • Agenda

    Introduction to TSI and our Methodology

    Scrap Update Key International markets o Turkey o India oAsia

    Scrap - New Opportunities in an old game

  • $300

    $320

    $340

    $360

    $380

    $400

    $420

    $440

    CFR North Asia HMS 1 US$/tonne CFR Taiwan containerised HMS 1&2 80:20 US$/tonne

    PresenterPresentation NotesIn Q1 of 2013, Taiwanese Steel Mills were initially very positive as they feel that things would turn for the better, after the lows seen in Q4 2012 (around the same time that iron ore prices plummeted to $80/t) however we soon see here this was not to last. Weak domestic demand was exacerbated by the high cost of scrap, leading