Steel Raw Materials: Weekly Market Tracker

l MBR’s Steel Raw Materials Index was little changed (-0.03%) week-on-week, given that steel raw materials prices were mixed in their movements. MBR's Global Steel Price Index declined by 0.28% week-on-week, as price firmness in the US domestic market for flat and long products was offset by weakening prices in the EU and China. MBR believes the seasonal summer slowdowns and maintenance activities will likely dampen steel output, reducing raw materials demand over the third quarter.

l Iron ore sales volumes and prices strengthened following the Dragon Boat holiday in China last week. Upward support was primarily garnered by restocking activities from small to medium-sized mills. Nevertheless, MBR believes the recent rebound will be shortlived, as the demand outlook for international finished steel products remains bearish. Iron ore price support will be further dampened as seasonal summer maintenance programmes at mills commence, reducing steel production down and, as a result, iron ore demand. MBR maintains its view that prices will perform sluggishly over the third quarter, before a modest recovery takes hold in Q4, supported by restocking activity.

l International scrap prices changed little this week, as weakening demand for finished steel products dampened scrap trade activity. Turkish steelmakers faced higher costs, as the depreciation of the lira left producers with higher steel input costs, while Turkish-origin rebar export prices remained subdued. Prolonged weakness in Europe’s construction sector has translated into reduced steel demand and lower scrap consumption this month. In the USA, improved demand from the flat products market may provide slight support to scrap prices next month.

l Coking coal and coke prices underwent some mixed developments over the last week, largely reflecting a decline in business activity, which we believe stems from a shorter working week owing to holidays in China. MBR’s short and long-term outlook has worsened as Chinese steel output seems increasingly on course to slowdown. Efforts to reduce production have already been witnessed by the Chinese authorities though the reductions have been minimal. Meanwhile, the Q3 contract settlements are still to be decided, as miners resist bids from steel mills that have now fallen under $150/tonne FOB.

MBR Steel Raw Materials Index versus MBR Global Steel Price Index*MBR's Steel Raw Materials Index lost support this week, as finished steel products demand in the EU and China continued to weaken

Source: Metal Bulletin Research *2006=100

75

100

125

150

75

100

125

150

175

200

225

Jan 10

Mar 10

May 10

Jul 10

Sep 10

Nov 10

Jan 11

Mar 11

May 11

Jul 11

Sep 11

Nov 11

Jan 12

Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

Mar 13

May 13

Raw Materials Index

Global Steel Price Index [RHS]

Sales of iron ore strengthen after Chinese holidays

Weakening demand for finished steel products dampens scrap trade activity

Steel Raw Materials: Weekly Market Tracker Regular analysis of coking coal, coke, iron ore, scrap, ferro-alloys, zinc and freight markets

MBR Steel Raw Materials Index* = 157.42 0.03%

Issue 27718 June 2013www.metalbulletinresearch.com

Steel Raw Materials: Market Tracker 1Coke and Coking Coal Highlights 6Iron Ore Highlights 8Ferro-alloy Highlights 10Zinc Highlights 11Scrap Highlights 12Iron Metallics Highlights 14Freight Highlights 15Key Global Economic Indicators 16

http://www.metalbulletinresearch.com/Article/2760863/Aluminium-Sheets-and-Extrusions-Weekly-Statistical-Data-Spreadsheets.html

Steelmaking Raw Materials MonthlyAnalysis of ferrous scrap, iron metallics, iron ore and coking coal markets

Issue 117January 200818 January 2008www.metalbulletinresearch.com

ContentsMarket prices 2North America 4Europe 7Asia 10Raw materials 12

Export rebates unchanged in China

l The Chinese government has put an end to the debate over rebates for aluminium rod, wire, bar and extruded profiles by reducing them to zero from July 1. However, sheet, coil and plate remain at 11% and foil at 13%. This move was largely unexpected and reflects the lobbying power of the new state-owned mills. Export agents and mills, especially those where massive investments have been made recently, are relieved but there is a general feeling that the remaining rebates are still under threat and may be reduced later in the year. Anticipation of the rebate cuts stimulated an increase in exports of semis over the past months.

l The North American flat rolled market has remained subdued in June as demand for rolled products has declined and ordering is weak. The market has been reported as soft and, while some mills are busy, most are generally struggling. Unsurprisingly, mills have been unable to maintain margins, and margins on standards have fallen by a cent. Lead times remained flat at 3-5 weeks in June. Weakening end-use demand is clearly illustrated by the weak US housing market, which saw no improvements. US housing starts fell by 24.2% year-on-year in May, while planning activity also softened as building permits fell 21.7% year-on-year in the same month.

l Aerospace market still booming: page 7l Mill margins weaken in Asia: page 12l Potential growth in Nigeria: page 19

40%

30%

20%

10%

0%

-10%

-20%

-30%

(% ch

ange

yea

r-on

-yea

r)

EAA vs Rolled Product Orders Indices The AA rolled products orders index continued to spiral down, falling by 15.7% year-on-year in May.

EAA Rolled Product Orders Index 6-mma

AA Sheet & Plate Orders Index 6-mma

6-mma = 6 month moving average

May Aug Nov Feb May Aug Nov Feb May Aug Nov Feb May04 04 04 05 05 05 05 06 06 06 06 07 07

Source: MBR, AA, EAA

Metal Bulletin Research subscription rates are charged strictly on a per individual user basis.

Unauthorised redistribution of the information, including: the printing, scanning or forwarding of the file, sharing login details to the website or saving the file to a server, all constitute a violation of copyright law.

The easy solution? Our Corporate Access Programme (CAP) offers flexible tailored access to MBR's publications for the number of employees needed by your company. With instant access, your business will never have to wait for the information that could be critical to your forecasts.

Contact us today to discuss a hassle-free, customised programme that addresses your individual needs and fully complies with copyright guidelines.

The programme benefits:l A well-informed staff base that can react to the changes and

developments affecting its business l Substantial savings on a corporate subscription over individual

subscription rates l A simplified billing system, saving time as well as valuable resources l A programme tailored to meet your needs l Ensured copyright compliance to help you avoid the legal risks of

sharing subscriptions

Please contact Richard O'Donoghue at any time on +44 20 7779 8938 or email: [email protected] for more information about CAP, and find out today how to expand your firm’s subscription account.

IMPORTANT NOTICE

4 Steel Raw Materials: Weekly Market Tracker June 2013

Metal Bulletin Research

Unit Prices today

Prices 7 days ago

% ch wk/wk

Weekly price trend

Prices 4 weeks ago

% ch vs. last month

Coking Coal (1) Australian export FOB $/tonne 150 150 0.0% FLAT 158 -5.1%US (low-vol) export FOB $/ton 138 140 -1.4% DOWN 153 -9.8%Chinese (domestic price - Shanxi Province) $/tonne 158 165 -3.9% DOWN 178 -11.0%

Coke Chinese export FOB (3) $/tonne 248 248 0.0% FLAT 251 -1.2%Chinese domestic (2) $/tonne 202 205 -1.3% DOWN 212 -4.8%

Iron Ore Chinese fines import CFR $/tonne 115 114 0.9% UP 125 -8.0%Indian export FOB (63.5% Fe) $/tonne 104 103 1.0% UP 113 -8.4%Chinese pellet import CFR $/tonne 140 138 1.1% UP 153 -8.8%Chinese domestic concentrate (13) $/tonne 152 151 0.7% UP 163 -6.7%Chinese domestic pellet(14) $/tonne 174 173 0.5% UP 180 -3.6%MBIO62, CFR Qingdao (62% Fe)(12) $/tonne 118.20 111.96 5.6% UP 125.47 -5.8%

Pig Iron CIS export (Baltic Sea) FOB $/tonne 415 418 -0.6% DOWN 418 -0.6%CIS export (Black Sea) FOB $/tonne 378 383 -1.3% DOWN 383 -1.3%Brazilian export (Vitoria) FOB $/tonne 375 375 0.0% FLAT 388 -3.2%Brazilian export (Ponta da Madeira) FOB $/tonne 385 383 0.7% UP 398 -3.1%EU import CFR $/tonne 433 441 -1.7% DOWN 448 -3.2%

HBI Venezuelan export (5) $/tonne 285 285 0.0% FLAT 285 0.0%

Ferrous scrap US domestic HMS No1 $/l.ton 335 335 0.0% FLAT 345 -2.9%US domestic shredded $/l.ton 356 356 0.0% FLAT 366 -2.7%US scrap export East Coast HMS No1 FOB $/tonne 321 321 0.0% FLAT 342 -6.1%US domestic No1 Busheling $/l.ton 380 380 0.0% FLAT 380 0.0%

EU Rotterdam HMS No1 FOB $/tonne 307 305 0.7% UP 336 -8.6%EU Rotterdam HMS No1&2 FOB $/tonne 286 296 -3.4% DOWN 309 -7.4%EU Rotterdam shredded FOB $/tonne 328 327 0.3% UP 352 -6.8%

South Korean import HMS No1 CFR $/tonne 360 365 -1.4% DOWN 373 -3.5%Japan export HMS No2 FOB ¥/tonne 30,250 31,250 -3.2% DOWN 32,250 -6.2%Japan domestic delivered HMS No2 (Tokyo) ¥/tonne 31,250 31,750 -1.6% DOWN 31,750 -1.6%Japan domestic delivered HMS No2 (Osaka) ¥/tonne 32,250 32,250 0.0% FLAT 32,750 -1.5%Chinese heavy domestic scrap Rmb/tonne 2,370 2,370 0.0% FLAT 2,610 -9.2%Chinese HMS No. 1&2 (80:20) import from USA CFR $/tonne 345 345 0.0% FLAT 353 -2.1%Turkish A3 import CFR (Izmir) $/tonne 348 348 0.0% FLAT 360 -3.5%Black Sea A3 export FOB $/tonne 340 340 0.0% FLAT 352 -3.4%MB ferrous scrap Turkey index CFR Iskenderun $/tonne 336.79 321.77 4.7% UP 352.44 -4.4%

Ferro-Silicon (75%) European free market €/tonne 1,085 1,090 -0.5% DOWN 1,125 -3.6%US import CFR $/lb 0.91 0.92 -1.1% DOWN 0.92 -1.1%Japanese import CFR $/tonne 1,405 1,405 0.0% FLAT 1,405 0.0%Chinese export FOB $/tonne 1,390 1,390 0.0% FLAT 1,390 0.0%

Ferro-Manganese European high-carbon (78%) €/tonne 770 770 0.0% FLAT 818 -5.8%US high-carbon (78%) $/l. ton 1,075 1,075 0.0% FLAT 1,075 0.0%US medium-carbon (80%) $/lb 0.89 0.89 -0.6% DOWN 0.89 -0.6%Chinese high-carbon FOB (75%) $/tonne 1,505 1,505 0.0% FLAT 1,505 0.0%

Silico-Manganese Chinese export (65% Mn, 17% Si) $/tonne 1,510 1,510 0.0% FLAT 1,510 0.0%European lumpy (65-75% Mn, 14-25% Si) €/tonne 855 860 -0.6% DOWN 875 -2.3%US free market (65-75% Mn, 14-25% Si) $/lb 0.53 0.55 -4.5% DOWN 0.55 -4.5%

Ferro-Chrome European import (60%) $/lb 0.98 0.98 0.0% FLAT 1.04 -6.3%(high-carbon) US import (60-65%) $/lb 1.01 1.01 0.0% FLAT 1.01 0.0%

Chinese Import (50% Charge Chrome) CIF Shanghai $/lb 0.89 0.89 0.0% FLAT 0.88 1.1%

Ferro-Vanadium European destinations delivered $/kg 27.53 27.70 -0.6% DOWN 27.80 -1.0%(70-80%) US free market $/lb 13.25 13.25 0.0% FLAT 13.50 -1.9%

Vanadium pentoxide CIF Europe $/lb 5.68 5.68 0.0% FLAT 5.80 -2.2%

Ferro-Molybdenum European destinations delivered (65-70%) $/kg 26.50 26.85 -1.3% DOWN 27.00 -1.9%US free market (65-70%) $/lb 12.18 12.18 0.0% FLAT 12.05 1.0%

Molybdic Oxide European in-warehouse $/lb 10.68 10.80 -1.2% DOWN 10.83 -1.4%US in-warehouse $/lb 11.10 11.10 0.0% FLAT 11.10 0.0%

Zinc LME spot $/tonne 1,818 1,830 -0.6% DOWN 1,852 -1.8%LME three-month $/tonne 1,855 1,866 -0.6% DOWN 1,887 -1.7%

Aluminium LME spot $/tonne 1,816 1,841 -1.4% DOWN 1,840 -1.4%LME three-month $/tonne 1,856 1,881 -1.4% DOWN 1,874 -1.0%

Tin LME spot $/tonne 20,250 20,479 -1.1% DOWN 20,966 -3.4%LME three-month $/tonne 20,300 20,506 -1.0% DOWN 21,015 -3.4%

LME Index (6) Index 313 315 -0.7% DOWN 321 -2.4%

CRB Index spot (7) Index 478 476 0.3% UP 473 1.0%

Freight JEHMA (8) Index 8,113 7,969 1.8% UP 7,844 3.4%BSI S2 Route (9) $/day 7,507 7,481 0.3% UP 7,071 6.2%Baltic Dry Index (BDI) Index 900 812 10.8% UP 841 7.0%Baltic Supramax Index (BSI) Index 900 889 1.2% UP 851 5.8%

Energy Crude oil WTI (10) $/barrel 97.85 95.88 2.1% UP 95.01 3.0%Natural gas (Henry Hub) $/mmBtu 3.76 3.74 0.7% UP 4.19 -10.1%

Exchange Rates Dollar : Euro $:€ 0.750 0.750 -0.1% DOWN 0.771 -2.7%Dollar : Pound $:£ 0.636 0.638 -0.3% DOWN 0.654 -2.7%Dollar : Yen $:¥ 95.0 96.1 -1.1% DOWN 100.98 -5.9%Dollar : Renminbi $:Rmb 6.12 6.15 -0.4% DOWN 6.14 -0.3%Dollar : Rouble $:Rs 31.50 32.10 -1.9% DOWN 31.33 0.5%

Note: (1) Hard coking coal spot price (FOB) (2) Basis second grade, average of all producing provinces (3) Basis Shanxi Province, first grade, <12.5% ash. (4) Basis Black Sea/Baltic Sea. (5) Basis FOB stowed (6) A weighted average of the six base metals, with January 1999 as the base. (7) Commodities Research Bureau is a US commodities research data firm, which has began an index tracking the price movements of 22 commodities in 1962. It currently uses 1967 as its base. (8) JE Hyde Handymax Index tracks changes in the following routes: Antwerp - Skaw Trip Far East, Canakkale Trip Far East, Japan - SK/NOPAC or Australia, Japan - SK Trip Gib - Skaw range, Antwerp - Skaw Trip US Gulf, USG Trip Skaw - Passero. (9) Delivery to South Korea/Japan, range for one Australian or TranspaCIFic round voyage, for a 35/40 day round trip, with redelivery to South Korea/Japan range 5% commission total. (10) West Texas Intermediate, Nymex. (12) Latest figures available at www.mbironoreindex.com. (13) Hebei region concentrates with ferrous content 66-69%, average of all producers. (14) Average of 9 producing regions, ferrous content ranging from 54-63.5%.* 2006=100. The MBR Raw Materials Index is a weighted measure of price movements of four of the most influential raw materials required for the steel making process, as well as of freight. The average price for 2006 was taken as the base value. As of 22/05/12, the CIS Pig Iron Export price was split into two regions; Baltic Sea and Black Sea. The Chinese import charge chrome price is the MB 50% Charge Chrome Index value.

Weekly Raw Materials Prices

June 2013 Steel Raw Materials: Weekly Market Tracker 5

Metal Bulletin ResearchMetal Bulletin Research

Scrap - USHMS No 1(1) Midwest 369 345 335 335 340 355 355 370 375 390 390 385 374 363 349 367 393 381(2) East Coast 369 345 325 340 360 375 382 390 386 400 390 388 375 363 365 386 376 371(2) West Coast 340 322 321 330 350 372 364 364 356 385 381 369 359 344 357 362 362 354US shredded(1) Midwest 391 366 355 355 365 375 375 390 395 410 410 405 394 383 369 387 413 401(2) East Coast 360 345 340 345 365 380 387 395 391 405 395 393 380 368 370 391 381 376(2) West Coast 345 327 326 335 356 378 369 370 361 391 387 375 364 349 362 367 368 359

US No.1 busheling 404 380 380 380 370 380 380 400 410 430 430 420 410 400 383 397 432 423Scrap - AsiaJapan (Kanto price)

HMS No 2 ('000 ¥/tonne) 34 32 33 32 31 31 31 31 27 32 34 35 34 34 32 30 32 36(2) HMS No 2 export 345 314 325 327 327 327 340 340 337 365 367 369 350 331 333 339 351 355South Korea

HMS No 1 ('000 won/tonne) 343 338 343 354 365 376 398 393 364 393 392 374 347 350 370 386 374 361(2) HMS No 1 import 402 376 370 380 380 390 390 411 415 440 437 433 408 396 390 406 418 413Scrap - EuropeHMS No 1(3) Belgium 245 230 212 215 227 248 234 236 254 260 249 249 245 239 234 241 242 242

France 283 268 247 251 265 288 273 275 296 303 290 290 286 279 273 281 282 282Germany 270 255 235 239 252 274 259 261 281 289 276 276 272 265 259 267 268 268Italy 278 258 238 241 255 278 262 264 285 292 280 279 275 268 262 271 271 271Spain 261 241 222 225 238 259 245 247 266 273 261 261 257 251 245 253 253 253

(4) UK 250 238 219 223 235 256 242 244 263 269 258 258 254 247 242 250 250 250(2) Export 367 342 318 333 353 368 375 383 379 393 382 380 367 356 357 379 368 364Shredded(3) Belgium 265 250 230 234 247 269 254 256 276 283 271 271 266 260 254 262 263 263

France 298 283 261 265 279 305 288 290 312 320 307 306 302 294 288 297 297 297Germany 275 260 240 243 257 280 264 266 287 294 282 282 277 270 264 273 273 273Italy 294 274 253 256 271 295 279 281 302 310 297 297 292 285 279 287 288 288Spain 271 251 231 235 248 270 255 257 277 284 272 272 267 261 255 263 264 264

(4) UK 255 243 224 227 240 262 247 249 268 275 263 263 259 253 247 255 255 255(2) Export 380 355 328 343 363 378 385 393 389 403 392 390 377 366 367 389 378 374

Pig iron (2)

US import 420 420 410 425 430 435 435 435 435 453 469 432 426 442 438 435 431 447Korea import 420 420 440 455 455 455 445 437 433 460 455 451 426 442 463 439 436 458CIS export (Baltic Sea) FOB 433 425 415 420 430 435 435 440 440 467 485 441 439 447 436 439 444 463CIS export (Black Sea) FOB 400 388 390 395 405 410 410 415 415 433 455 411 406 408 410 414 414 428

HBI (2)

USA 340 340 340 350 350 360 365 369 366 385 377 369 345 358 360 367 361 365

Iron ore (2)

MBIO62 CFR Qingdao 137 126 117 113 115 120 122 125 130 130 140 135 135 130 122 128 120 12063.5% fines CFR China 138 128 125 116 118 123 125 128 133 133 143 138 138 133 125 132 123 123

Coking coal (2)

Chinese domestic (Shanxi) 194 183 180 185 190 195 190 196 200 202 203 191 195 190 197 200 188 183Australian HCC spot FOB 164 158 155 155 160 165 165 170 169 165 170 166 165 165 166 171 149 152US low-vol HCC spot FOB 159 153 150 150 153 160 160 168 165 160 162 160 160 159 160 168 143 147

Coke (2)

Chinese FOB export 265 253 255 255 260 260 265 265 270 270 260 260 270 270 267 272 254 258

Q4 14Apr-13 May-13 Nov-13Oct-13Sep-13 Dec-13 Jan-14 May-14 Q2 15

Notes: (1) $/long ton (2) $/tonne (3) €/tonne (4) £/tonne. South Korean domestic HMS No 1 ('000 won/tonne) includes a 10% VAT

Jul-13 Mar-14 Q1 15Aug-13

Monthly market prices and forecastQ3 14Jun-13 Feb-14 Apr-14

Steel Raw Material week-on-week price performanceIron ore price gains are expected to be shortlived, as mills begin summer maintenance programmes

Source: Metal Bulletin Research

5.6%

0.0%

-1.3%

0.0%

4.7%

2.1%

0.7%

10.8%

-2% 0% 2% 4% 6% 8% 10% 12%

MBIO62

Australia HCC

Chinese Coke

US HMS No.1

MB Scrap Index

WTI

Natural Gas (Henry Hub)

BDI

Iron ore, scrap, and coking coal price forecasts ($/tonne)Raw materials demand will retreat as seasonal summer slowdown dampens market activity


0

20

40

60

80

100

120

140

160

180

200

0

100

200

300

400

500

Feb 10

Apr 10

Jun 10

Aug 10

Oct 10

Dec 10

Feb 11

Apr 11

Jun 11

Aug 11

Oct 11

Dec 11

Feb 12

Apr 12

Jun 12

Aug 12

Oct 12

Dec 12

Feb 13

Apr 13

Jun 13

Aug 13

Oct 13

Chinese domestic hard coking spot price (ex-Shanxi province)US East Coast export HMS No. 1MBIO62 CFR Qingdao



Coke and Coking Coal Highlights

l Prices show signs of stability; we feel temporarilyl Chinese anti-pollution measures to dampen demand outlook l External suppliers continue to idle their higher-cost asset

Prices stable but outlook remains shakyBoth spot prices for coking coal and coke stabilised in the past week, owing largely to a shorter trading week as Chinese market participants took a three-day national holiday for the Dragon Boat Festival. Metal Bulletin’s coking coal indices moved up slightly last week, marking the first rise since March. The weekly indices stood at $148.33/tonne CFR Jingtang for low-vol (<>21%) materials and $136.49/tonne CFR Jingtang for mid-vol (<>25%) materials on Friday June 14, up $1.44 and $0.60/tonne respectively compared with a week earlier.

Owing to the lack of actual trades, much attention was directed towards futures. Contrary to the trend in our index, the most-traded September coking coal contract on the Dalian Commodity Exchange (DCE) lost Rmb12/tonne ($2/tonne) week-on-week to settle at Rmb1,031/tonne ($168/tonne) last Friday, but it regained all the losses on Monday, following the strong rebound in billet prices and steel futures.

Nevertheless, we believe coking coal prices will still be under downward pressure in the coming weeks as the rally in steel prices is likely to be unsustainable given the still slack market fundamentals. Steel production has diminished slightly since the middle of May as a few mills started to conduct maintenance, though it remains near the record high, sustaining raw

Market Outlook Coking coal and coke prices underwent some mixed developments in the past week suggesting to some that the downturn may be coming to an end. In our view, however, the mixed conditions – Chinese import prices rose while domestic transactions fell – largely reflect a lack of business owing mainly to the shorter working week around the Dragon Boat Festival. If anything, the outlook has worsened for the short and long term as Chinese steel production seems increasingly on course to fall and slow down respectively.

Token efforts to reduce production have already been witnessed by the Chinese authorities, though the pricing strategies of leading producers such as Wuhan suggest that sustaining shipments rather than steel prices remains a priority; a factor that may help to delay the inevitable decline in raw materials demand. Meanwhile, third-quarter contract settlements are still to be decided, largely because miners are resisting bids from steel mills now under $150/tonne FOB.

Spot prices stabilised with China on a three-day national holiday for the Dragon Boat Festival

Key PricesThis

weekNext week

Chinese Coke export 248 0.0%Shanxi coking coal 158 0.0%Australia coking coal 150 0.0%

0

100

200

300

400

Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13

Australian coking coal (FOB, $ tonne)



Chinese crude steel and coke production (million tonnes) - crude steel and coke output in

China are both near record highs

20

25

30

35

40

45

20

30

40

50

60

70

Jan 08

Oct 08

Jul 09

Apr 10

Jan 11

Oct 11

Jul 12

Apr 13


Metal Bulletin coking coal indices The two weekly indices moved up slightly last week, but

further declines are expected

130

140

150

160

170

180

190

Feb 13Mar 13Mar 13Mar 13Apr 13Apr 13May 13May 13Jun 13

$/to

nne

MBCCI Low vol

MBCCI Mid vol



More local Chinese governments will become stricter on air pollution controls

materials demand. Nevertheless, downstream steel fundamentals are particularly weak and as a result, major Chinese steel mills continue to lower ex-work prices to promote sales. Wuhan Steel announced that it would cut its HRC list prices by Rmb200/tonne for July shipment.

China announces new anti-pollution measuresChina’s state council, after a meeting chaired by Premier Li Keqiang over the weekend, outlined a string of measures to curb the air pollution that is plaguing the country. Among all the ten measures, the central government is determined to curb the growth of new capacities in high energy-consuming industries, including steel. Any projects that fail the government’s environmental impact assessment are to be barred from access to land and bank loans, among other restrictions. The state council also wants the move to eliminate obsolete steel capacity in the country’s 12th Five-Year Plan be completed a year ahead of schedule .

Last month, we saw that the government of Tangshan, one of the most industry-intensive and polluted areas in China, ordered the closure of 199 heavy-polluting industrial facilities, including some units of steelmakers and coke producers. We believe more local governments will put environmental problems on the table following Beijing’s stricter approaches against air pollution, which will lend support to the steel market in the long term as it will help ease the long-standing oversupply issues by controlling the growth of new capacity and reducing old ones.

While capacity curtailments may support finished steel markets in the short but particularly long term, the outlook for raw materials demand in China continues to weaken as a result.

Squeezed profit margins lead to more idle coal minesEnvironmental reasons given to restrict steel and raw materials supply outside of China may be less pronounced but profitability concerns are continuing to have an effect. Australian coking coal operations used to be considered lower-cost, but the strong Australian dollar, increasing labour costs, and also stricter environmental regulations have made them less profitable in recent years. Therefore, Anglo American, usually one of the more bullish miners in the industry at least for the longer term, lately announced that it would place its Aquila metallurgical coal mine in central Queensland under care and maintenance from July 30. Aquila is a bord-and-pillar operation producing around 0.5m tpy of hard coking coal and not the first facility that Anglo American has decided to idle in the past year, although overall production has been accelerating of late.

Before that, the US coal producer Alpha Natural Resources, the third in the world able to produce more than 20m tpy, idled the Justice No 1 mine at its subsidiary Independence Coal in Boone County, West Virginia, earlier this month, while Severstal subsidiary PBS Coals idled its Roytown and Hart mines in Pennsylvania in December last year. In addition, BHP Billiton and Rio Tinto are trying other ways to cut cost, such as divesting coal assets or putting coal assets on the block. We think there will be more coal mine idling or even closures owing to lacklustre demand and a more competitive market.

0

500

1,000

1,500

2,000

2,500

3,000

Jan 07

Jun 07

Nov 07

Apr 08

Sep 08

Feb 09

Jul 09

Dec 09

May 10

Oct 10

Mar 11

Aug 11

Jan 12

Total ferrous scrap exportsto Turkeyto Chinato rest of world


Dalian Commodity Exchange coke prices (rmb/tonne) Coke futures prices are more volatile recently, unlike the

relatively steep falls earlier this year

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

1,800

1,900

Jun 12

Aug 12

Oct 12

Dec 12

Feb 13

Apr 13

Jun 13


Russia's monthly coal production (million tonnes) Coal production in Russia has dropped in the past two

months, but still above the levels seen last year

20

23

26

29

32

35

Jan 09

May 09

Sep 09

Jan 10

May 10

Sep 10

Jan 11

May 11

Sep 11

Jan 12

May 12

Sep 12

Jan 13

May 13



Iron Ore Highlights

l Sellers take a disciplined approachl Consumers restock after 3-day holiday l China set to abolish import licensing system

The market reboundsSellers appeared to gain confidence after the 3-day long Chinese holiday last week, as smaller steel mills returned to the market to restock. As a result, week-on-week prices for Chinese import fines (Fe 63.5%) increased by 0.9% to $114.50/tonnes CFR, while those for pellets (Fe 65-66%) rose by 1.1% to $139.50/tonne CFR. Chinese domestic iron ore prices also gained. Those for concentrate moved up by 0.3% to $152.08/tonne, while pellets edged fractionally higher by 0.1% to $172.96/tonne (average of a selection of prices).

As in the physical market, swaps activity resumed sharply after the holiday break. However on a weekly basis prices did not make any gains. Those swaps tied to delivery in July traded between $109.25 – 109.70/tonne, a decrease of around 2.6% compared with the previous week, while those for the third quarter also fell by 2.9%, to trade in a range of $108.75 – 109.50/tonne.

On the Global ore platform, a cargo of 80,000 tonnes of 62% Fe Australian fines of June delivery was traded at $116/tonne CFR, up by around 2.7% from the week before. Similarly,

Market Outlook After the 3-day Dragon Boat holiday sellers harden their stance. They sensed consumers, especially small-sized mills would be returning to the market to re-stock - indeed they did. Both sales volumes and prices moved marginally higher. Nevertheless, this recent rebound is expected to be short-lived as the steel market remains weak. In addition, a growing number of mills are starting their summer maintenance programmes, causing steel production cuts to take effect and bear down on iron ore demand.

Over the longer term, Premier Li Keqiang has signalled that the government will tolerate slower growth as it pushes through much needed reforms to achieve a more sustainable growth rate. As such, economic growth could fall to 7% over the next 12- 18 months, sparking fresh concerns among producers about the viability of their projects. The latest U-turn of which appears to be the suspension of the $5.9bn Oakajee Port and Rail iron-ore project in Western Australia, by Mitsubishi. We maintain our view that prices will perform sluggishly over the third quarter before a modest recovery takes hold in the fourth, as mills embark on a restocking cycle.

Week-on-week prices for Chinese import fines increase

Key PricesThis

weekNext week

MBIO62 118.20 0.0%Chinese fines import (63.5%) 115 0.0%Chinese pellet imports (65-66%) 140 0.0%

50

100

150

200

Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13

Chinese iron ore import (62% CFR)

($ tonne)



Chinese domestic iron ore prices Prices show signs of stabilising

Source: Metal Bulletin Research, Steelhomes

Chinese port stocks Most buyers are still exercising caution, awaiting stronger

market cues before drawing on port stocks

0%

5%

10%

15%

20%

25%

30%

60

65

70

75

80

85

90

95

100

105

Feb 11

May 11

Aug 11

Nov 11

Feb 12

May 12

Aug 12

Nov 12

Feb 13

May 13

% o

f tot

al

mill

ion

tonn

es

Total Indian [RHS]

130

140

150

160

170

180

190

200

Jan 12

Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

Mar 13

May 13

$/to

nne

Concentrate domestic

Pellets domestic



Many steelmakers are beginning to trim production and carry out maintenance

Project suspensions in Australia will be a blow to Midwest miners

Rio Tinto concluded a sale of 165,000 tonnes of Pilbara Blend fines with laycan June 27 - July 6 at $113.72/tonne CFR, while BHP Billiton surpassed market expectations with its sale of 80,000 tonnes of Mining Area C fines with laycan June 21-30 at $111.85/tonne CFR.

Steel mill iron ore requirements pull-back in the short termNumerous steelmakers are beginning to trim production and carry out maintenance. Estimates released by the China Iron & Steel Association showed that China’s daily crude steel output totalled 2.154m tonnes in late May, down 1.4% from the preceding 10 days. Those in the market expect steel output to drop further in the coming weeks, suggesting that iron ore consumption will dumb down.

In addition, given the challenging situation faced by high cost Chinese steel mills, there appears to be a growing trend among them to sell their own iron ore inventories for cash. Thus the market in the third quarter is likely to be uninspiring. However, during the following quarter we would expect to see a restocking phase start up and encourage prices to a new support level at $120/tonne from $110/tonne.

China’s import licence system seen as a failureDuring the second half of this year China will call time on its iron ore import licensing system. The system was designed to help reduce the pricing power of the big-3 by regulating trade. However it proved to be inefficient, creating a secondary market for middlemen to rent out the licenses. Moreover, the system made imports more expensive for Chinese mills that were consequently subjected to additional agency fees.

Oakajee project becomes the latest casualty in a weak iron ore marketThe suspension of the Oakajee Port and Rail iron-ore project in Western Australia by Mitsubishi, will come as a serious blow to many of the Midwest miners who were reliant on the scheme to promote their exports. According to reports, a failure to find a Chinese investment partner to help fund construction contributed to the suspension.

Mitsubishi paid $312m in February of last year to take full control of the long-delayed venture. By November it had announced that uncertain economic conditions had prompted a "slowdown" that involved scaling back work and shedding jobs. Since then, Mitsubishi has been searching for investors, especially in China.

Given softer iron ore prices it is evident that the global project supply pipeline is constricting. Nonetheless there is still a large volume of supply coming on. On our assessment, supply is set to accelerate during 2014, pushing the market into a significant surplus by 2016.

Source: Metal Bulletin Research,

Share price performance of Midwest miners dependent on the Oakajee project vs established miner BHP-Billiton The suspension of Oakajee impacts hard on GWR and

Gindalbie Metals

0

0.2

0.4

0.6

0.8

1

1.2

1.4

Aug 12

Sep 12

Oct 12

Nov 12

Dec 12

Jan 13

Feb 13

Mar 13

Apr 13

May 13

BHP GWR GM


OTC Iron Ore Swaps Forward Curve Late week's rebounds in the OTC market fail to translate

into week-on-week price gains

105

110

115

120

125

130

135

140

145

Spot price Front month

Second month

Next quarter

Second coming quarter

$/to

nne

12-Apr-13

14-May-13

14-Jun-13



Market Outlook

Ferro-alloy Highlights

l Ferro-alloy prices continue to slide on low market activityl Weakening rand causes a cut in dollar prices l Little price support expected until the third quarter

Chrome prices hold steady, market direction uncertainWith low levels of market activity, spot prices for most ferro-alloy products have held steady this week. Metal Bulletin’s Charge Chrome Index has remained at 89¢/lb CIF Shanghai and although some traders anticipate prices to move upwards on rising chrome ore costs, other traders point out that South African ferro-chrome smelters are benefitting from the weakening rand, which is helping producers there to keep dollar prices constant.

Unfortunately for ferro-chrome smelters, demand growth is weak now, with a number of Chinese stainless steel mills having brought forward maintenance outages and reducing their purchases in recent months. However, the country’s biggest stainless steel producer Taigang (TISCO) has provided some marginally positive news this week with its tender for July purchases announced at Rmb6,850/tonne ($1,118/tonne) — Rmb50/tonne higher than their June tender and equal to 84¢/lb.

Weakening rand seeing dollar prices cutNevertheless, in a market where buyers continue to hold the upper hand and South African suppliers are benefitting from a weakening rand, prices are likely to remain under pressure over the summer. Indeed, this has been the case for manganese prices this week, with Metal Bulletin’s index price for 44% manganese ore falling 6¢ to $5.62/mtu CIF Tianjin and the index price for 38% manganese ore falling 2¢ to $4.03/mtu FOB Port Elizabeth. With ample supplies, low demand a weakening currency, some South African producers have chosen to reduce their dollar prices to secure business.

Most ferro-alloys prices have slipped once again this week, with only ferro-chrome prices showing some marginal improvement, albeit from a low base. Lacklustre market activity coupled with an abundance of material has seen a number of producers reduce their prices further to secure business. South African producers in particular have been quick to cut prices in dollar terms given the weakening of the rand (see chart).

We expect ferro-alloy prices to remain subdued over the coming weeks as the summer slowdown affects purchasing levels by steel mills. The one bright spot in the steel industry now is the US market, where steel prices have been rising in recent weeks. Nevertheless, we think a sustained recovery is still a way off and ferro-alloy producers may have to wait until the third quarter to see prices move up with any degree of support.

Spot prices for most ferro-alloy products rollover this week


Chinese spot ferro-chrome prices, 50% Cr, 6-8% C ($/lb) Spot ferro-chrome prices in China have started edging

upwards in recent weeks, albeit from a low base

0.78

0.8

0.82

0.84

0.86

0.88

0.9

0.92

0.94

0.96

Jun 12

Aug 12

Oct 12

Dec 12

Feb 13

Apr 13

Jun 13


South African rand vs dollar exchange rate The weakening rand since early May has enabled ferro-

alloys producers in South Africa to cut prices in dollar terms

8

8.5

9

9.5

10

10.5

01 Jan

15 Jan

29 Jan

12 Feb

26 Feb

12 Mar

26 Mar

09 Apr

23 Apr

07 May

21 May

04 Jun

Key PricesThis

weekNext week

US import FeSi 0.91 0%EU import FeCr 0.98 0%US free market FeMo 12.18 0%Chinese export FeCr 0.89 0%

10

12

14

16

18

20

Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13

US FeMo prices, $/lb Mo



Asian spot premiums to continue risingSpot premiums rose again in Shanghai last week, reflecting a wider arbitrage between LME and SHFE prices, but also resilient demand for tonnages by financiers as the government’s clampdown on letter-of-credit financing activity appears mainly to have impacted on copper so far. Premiums in Singapore also rose on demand from China, as metal at this location is not tied up to the same degree as in Malaysia or South Korea. Quotes for spot premiums in Shanghai were last at $120-195/tonne, up $20 at the bottom end from last week, while the arbitrage window opened as wide as $129/tonne on Thursday in favour of importers, compared with an average of $73/tonne over the preceding two weeks. Expectations are that Asian premiums will continue to rise in the short term as financial demand locks up metal units.

Wider spreads, improved profitability of stock financing dealsLME zinc spreads widened last week, with cash to three-months reaching $40/tonne contango for the first time since April and averaging $37/tonne from $33/tonne previously. Meanwhile, the three-month to 15-month forward contango widened from $58/tonne early in the week to $88/tonne by the end, and the three-month to 27-month forward contango went from $121/tonne to $151/tonne last week. The wider forward spreads suggest a pick-up in forward buying interest into the lower prices, while the wider nearby spread would improve the profitability of financing deals.

Market Outlook

Zinc Highlights

l Prices look well supported and set to remain rangebound… l …though premiums are expected to continue higher l Zinc in demand from financiers as profitability of financing deals improves

Zinc, together with aluminium, has taken its direction from the lead contract recently, as relative value traders first bought then sold in these markets on the back of a squeeze in the lead spreads. There is tightness looming again in lead (and aluminium) in the coming months, which should keep all three markets supported in their recent trading ranges, irrespective of their fundamentals.

In zinc, there is some tightness in China, as traders look at financing deals with galvanising metal instead of copper, as the authorities are clamping down on this activity. That said, the fundamentals are not tight, which further supports the view that a range trading market will continue. Our technical analysis suggests that a move back above $1,900/tonne, basis LME three-month prices, would look constructive in the short term. This would require a bullish interpretation of the Fed’s statement on Wednesday, however, as that is likely to be the main price-setting event of this week. Depending on the wording chosen, further indications from the Fed that QE’s days are numbered may see selling across the commodities complex.

Rate of return on the cash-three-month rolling spread over Libor and risk premium, shows an improvement

Source: LME, Metal Bulletin Research

LME three-month official zinc price daily basis

1,500

1,800

2,100

2,400

Aug 12

Sep 12

Oct 12

Nov 12

Dec 12

Jan 13

Feb 13

Mar 13

Apr 13

May 13

Jun 13

3-month price

100-day MA

200-day MA

$/to

nne

Source: LME, Metal Bulletin Research

Total LME zinc stocks and cancelled warrants

250

360

470

580

690

800

910

1020

1130

1240

Sep 12

Oct 12

Oct 12

Nov 12

Dec 12

Jan 13

Feb 13

Mar 13

Apr 13

May 13

Jun 13

0%

10%

20%

30%

40%

50%

60%

70%

80%

Cancelled warrants [RHS]

LME stocks [LHS]

'000 tonne % of total tonnage

1,750

2,000

2,250

2,500

Q4 10

Q1 11

Q2 11

Q3 11

Q4 11

Q1 12

Q2 12

Q3 12

Q4 12


Zinc price forecast ($/tonne)

Key PricesThis

weekNext week

LME spot 1,818 -2%LME three month 1,855 -2%




Market Outlook

Scrap Highlights

l Turkish steel producers squeezed as the lira depreciates against the dollar l US scrap merchants may gain some support from strengthening flat products market l European scrap prices to retreat this month, as the construction sector remains weak

Turkish steelmakers’ costs increase with the depreciation of the lira In early June, the lira depreciated sharply against the dollar putting further pressure on Turkish steelmakers' margins, given that steel raw material import prices in to the country are primarily denominated in dollar terms. Steel mills have faced higher scrap import prices as Turkey's domestic currency weakens. Turkish steelmakers have been further constrained by cost pressures as finished steel products export prices continued to erode this month. Although Turkish-origin rebar export prices remained unchanged at $568/tonne FOB this week, prices are down $82/tonne year-on-year, a price level last seen in Q3 2010. Similarly, US East Coast HMS No.1 scrap export prices rolled over this week, holding at $321/tonne FOB.

In April 2013, EAF crude steel production in Turkey fell 3.96% month-on-month and 1.27% year-on-year, while scrap imports rose 20.1% month-on-month and fell 9.4% year-on-year. Since mid-April 2013, scrap import prices into Turkey have generally recorded consecutive week-on-week declines. MBR believes persistently low finished steel demand has forced steelmakers to cut steel product prices, leading mills to negotiate for discounts on steel input costs.

International scrap prices were little changed this week, as US East Coast export prices remained unchanged and European export prices recorded minimal price increases. Asian HMS No.1 import prices trended lower, falling $5/tonne owing to weak South Korean demand for US West Coast material. Turkish steelmakers were also affected by currency fluctuations, as the lira depreciated against the dollar, leaving steelmakers with higher steel raw material costs. Declining rebar export prices have heaped further pressure on Turkish mills, squeezing their margins and leading steelmakers to negotiate scrap import prices lower.

European scrap dealers have faced similar cost pressures, as weakness in the construction sector has translated into reduced steel demand and scrap consumption. Domestic scrap prices across Europe are anticipated to record declines ranging between €20-30/tonne this month. The US flat products market continued to show signs of strength this week, as service centres carried on with restocking activities. MBR believes improved demand from the flat products market may provide modest support for scrap prices next month.

Steel mills will continue to face higher scrap import prices, as Turkey's domestic currency weakens

50100150200250300350400

Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13

Germany HMS No. 1(€/tonne)


Key PricesThis

weekNext week

US HMS No.1 335 0.5%Japan HMS No.2 (¥) 31,250 -0.2%Turkish A3 import 348 0.5%Rotterdam HMS No.1 307 0.5%


EU27 EAF and BOF crude steel production ('000 tonnes) Between January and April 2013, EAF crude steel production

fell 10.76% year-on-year

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Jan 11

Apr 11

Jul 11

Oct 11

Jan 12

Apr 12

Jul 12

Oct 12

Jan 13

Apr 13

EAF crude steel productionBOF crude steel production


Turkish rebar exports ('000 tonnes) Turkish rebar exports fell 2.78% year-on-year between

January and April 2013, led by a 22.2% decline in exports

to the EU

0

100

200

300

400

500

600

700

800

900

1000

Apr 11

Jun 11

Aug 11

Oct 11

Dec 11

Feb 12

Apr 12

Jun 12

Aug 12

Oct 12

Dec 12

Feb 13

Apr 13

Other EU MENA Asia



Despite these negative fundamentals, MB's Ferrous Scrap Index for HMS 1&2 (80:20) CFR Turkey posted a $15/tonne increase over the last week, and MBR understands that recent activity in the bulk ferrous scrap export market between European scrap merchants and Turkish mills may be indicative of slight upward pressure on scrap prices over the remainder of the month. Given the weak demand outlook for finished steel products in the global market, MBR questions the sustainability of this price increase.

Domestic scrap prices in Europe are set to record sharp declines this monthEuropean domestic scrap prices are expected to fall €20-30/tonne in June, as weakening demand fundamentals place pressure on steel raw materials prices. Subdued activity in the construction sector this year has translated into reduced demand for finished steel products. As a result, market participants noted that monthly scrap price negotiations between dealers and mills were under way and that weakening market sentiment regarding finished steel demand would negatively impact the volume of scrap purchased. Between January and April 2013, EAF crude steel production in the EU27 fell 10.76% year-on-year, while BOF production fell 2.17% year-on-year. Prospects for steel demand growth in the short-term are unlikely, as the seasonal period of annual leave for most Europeans, which begins in July, coincides with Ramadan. While MBR does not believe that trading activity will come to a halt, we do anticipate that activity will soften, further dampening scrap demand across Europe.

Continued strength in the US flat products market will likely support scrap demandUS domestic HRC prices trended upward for a second consecutive week, diverging from global flat products prices. A $50/short ton increase for HR, CR, and HDG products announced by US steelmakers in late May has continued to gain traction this month, supported primarily by the restocking activities of service centres facing low inventory levels. The willingness of market participants to accept the recent flat products price increase suggests to MBR that scrap merchants selling material on the spot market later this month may gain slight support in scrap price negotiations next month.

At the same time, US crude steel production in the second week of June rose 1.03% week-on-week, according to the American Iron and Steel Institute (AISI). Similarly, the capacity utilisation rate rose to 78.1% over the week. In the week ending June 15, crude steel production and capacity utilisation rates exceeded levels seen last year with production rising 0.43% year-on-year.

MBR believes that scrap demand from mills will rise to meet the growth in crude steel production. In order to reflect the recent strength in the flat products market, along with the modest rise in crude steel production, MBR anticipates that US scrap dealers will be provided with some support in scrap price negotiations in July. Similarly, industrial grade scrap is expected to receive upward pricing support, as MBR understand that supplies have tightened, while strengthening automotive sales have increased demand.

Steel demand growth subdued in the short-term as the summer annual leave for Europe approaches


International Scrap Pricing Trends Prices continue to trend downward, as the global outlook

on finished steel demand remains bearish


Turkish lira to dollar exchange rate Depreciation of the lira has left Turkish steelmakers with

higher raw material import prices and lower steel export

250

300

350

400

450

500

550

Jan 10

May 10

Sep 10

Jan 11

May 11

Sep 11

Jan 12

May 12

Sep 12

Jan 13

May 13

Asian HMS No.1 import $/tonne CFR

EU Rotterdam HMS No1&2 (80:20) $/tonne FOB

1.65

1.7

1.75

1.8

1.85

1.9

Jan 12

Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

Mar 13

May 13

Turkish lira versus dollar


Market Outlook

Iron Metallics Highlights

l International iron metallics market characterised by weak demandl Subdued global finished steel prices prompt mills to cut input costs l Stability in scrap and iron ore prices to provide support

Far East merchant pig iron prices track scrap import prices lowerSouth Korean mills successfully negotiated a $5/tonne discount on merchant pig iron prices in June from suppliers in China, Japan and Russia, owing largely to weak mill demand and lower input costs. Far East mills also used declines in imported scrap prices, particularly US West Coast No.1 HMS material, to their benefit when negotiating new merchant pig iron orders. At the same time, the East Asian steel market continues to be burdened by overcapacity and saturated by an abundant supply of finished steel. Consequently, recent transactions for pig iron imports have been recorded at $385/tonne CFR basis, as mills continued to negotiate discounts on their input costs given weakness in finished steel prices.

CIS pig iron suppliers continue to suffer from weak demandSimilarly, demand for iron metallics remains dour in other regions and CIS suppliers have been unable to avoid facing falling prices, given that it still remains a buyer’s market and steel mills have retained the leverage when negotiating prices for fresh cargoes. As a result, CIS exporters witnessed merchant pig iron prices drop to $370-385/tonne FOB Black Sea, from $380-385/tonne a week earlier on the same basis.

Meanwhile, CIS suppliers exporting from Baltic Sea ports saw prices fall to $405-425/tonne FOB basis from $410-425/tonne the previous week. Consequently, this translated into lower European merchant pig iron import prices ranging from €297-338/tonne ($397-452/tonne) compared with €310-344/tonne a week earlier, as north and south European mills have been able to negotiate

Far East and European iron metallics import prices witnessed modest declines this week owing to a combination of subdued underlying demand, lower input costs and weak scrap prices. As a result, steel producers have successfully negotiated discounts for merchant pig iron prices as they maintained low inventories and continue to operate their purchasing activity on a hand-to-mouth basis.

However, MBR believe international scrap and iron ore prices have found some stability of late and are close to forming a floor. Therefore, we anticipate iron metallics producers will utilise this to their benefit in transactions for new orders over the coming weeks to put an end to recent uninterrupted price falls.


CIS suppliers unable to avoid facing falling prices

0

150

300

450

600

Q3 10 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13

South Korea pig iron(CFR, $/tonne)


Key PricesThis

weekNext week

CIS pig iron export 415 -0.5%Brazil export FOB 375 0.0%Latin America HBI FOB 285 0.0%

prices lower, with mills looking to keep inventory levels low given poor demand for finished steel products.

Steady scrap and iron ore prices to support iron metallics pricesMore recently, however, scrap prices in most regions have found some stability at these relatively low levels. We believe that a pricing floor in the scrap market is close and this will begin to provide support to alternative metallics prices in the coming weeks. At the same time, steady input costs, particularly iron ore prices, will provide producers with more leverage when negotiating with steel mills on fresh cargoes. That said, finished steel consumption remains dour and we expect underlying demand for iron metallics to remain equally weak given that mills will continue to purchase on a hand-to-mouth basis. Source: Metal Bulletin Research

MB Iron Ore Index vs. MB Scrap Index No.1&2 (80:20) We believe international scrap and iron ore prices have

reached a trough and we expect this to provide support to

iron metallics prices

300

320

340

360

380

400

420

100

110

120

130

140

150

160

170

Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13

MB Iron Ore Index 62%

MB Scrap Index No.1&2 (80:20)


Freight Highlights

l Pacific and Atlantic capesize markets show modest strength this week l Panamax market remains firm, despite recent holidays in Chinal North Baltic handysize market supported by increased scrap activity

This WeekPrevious

Week% change

w/wLast Month %change m/m Last Year %change y/y

SSY Atlantic Capesize Index 5,535 5,106 8.4% 5,241 6% 4,986 11%SSY Pacific Capesize Index 4,975 4,753 4.7% 4,707 6% 4,218 18%

Baltic Dry Index (BDI) 900 812 10.8% 841 7% 1,157 -22%Baltic Capesize Index (BCI) 1,537 1,352 13.7% 1,326 16% 1,493 3%Baltic Panamax Index (BPI) 859 764 12.4% 930 -8% 1,129 -24%Baltic Supramax Index (BSI) 900 889 1.2% 851 6% 1,296 -31%Baltic Handysize Index (BHI) 533 524 1.7% 553 -4% 713 -25%

Source: SSY, The Baltic Exchange

Freight Rates

This Week Previous Week

% change w/w

Last Month %change m/m Last Year %change y/y

SSY Capesize Pacific ($/tonne)Rizhao/Rotterdam 9.95 9.45 5.3% 9.40 6% 7.25 37%Dampier/Qingdao 7.65 7.25 5.5% 7.15 7% 6.60 16%Saldahna Bay/ Qingdao 13.15 13.00 1.2% 13.00 1% 12.60 4%Richards Bay/Kwangyang 12.25 11.80 3.8% 11.70 5% 11.50 7%Cape Lambert/Rotterdam 10.70 10.20 4.9% 10.10 6% 8.15 31%NSW 15.2M/Japan 10.80 10.45 3.3% 10.30 5% 9.80 10%Queensland/Rotterdam 13.60 13.10 3.8% 13.05 4% 11.15 22%NSW 15.2M/South Korea 10.70 10.40 2.9% 10.35 3% 9.90 8%T/C Transpacific round 1.72 1.33 29.3% 1.28 34% 0.75 129%SSY Capesize Atlantic ($/tonne)Narvik/Rotterdam 3.90 3.50 11.4% 3.60 8% 3.10 26%Tubarao/Rotterdam 8.30 7.60 9.2% 7.80 6% 7.20 15%Richards Bay/Rotterdam 7.15 6.65 7.5% 6.50 10% 6.10 17%Hampton Roads/Rotterdam 8.85 8.35 6.0% 8.60 3% 8.60 3%Puerto Bolivar/Rotterdam 8.75 7.95 10.1% 8.40 4% 8.25 6%Nouadibou/Taranto P2 5.95 5.40 10.2% 5.60 6% 5.05 18%Tubarao/Japan 17.40 17.10 1.8% 17.20 1% 17.00 2%Tubarao/Beilun+Baoshan 17.85 15.50 15.2% 17.60 1% 17.20 4%T/C Trip Cont/Far East 3.58 3.24 10.5% 3.36 7% 3.36 7%T/C Transatlantic round 1.28 0.71 80.3% 0.88 45% 0.67 91%JEHSUP 52k DWT Supramax ($/day)del Black Sea, redel Singapore-South Japan 12,500 12,500 0.0% 13,500 -7% 20,000 -38%del US Gulf, redel Skaw-Passero 20,750 19,850 4.5% 18,000 15% 25,500 -19%del Far east, redel Atlantic 4,000 4,000 0.0% 4,200 -5% 1,500 167%del to make Australia, redel India 5,100 5,250 -2.9% 5,200 -2% 2,750 85%JEHMA 45k DWT Handysize ($/day)Antwerp - Skaw Trip Far East 11,450 11,700 -2.1% 11,250 2% 16,250 -30%Canakkale Trip Far East 11,500 11,500 0.0% 11,250 2% 17,250 -33%Japan - SK / NOPAC or Australia rv 7,000 6,750 3.7% 7,200 -3% 3,500 100%Japan - SK Trip Gib - Skaw range 3,200 3,200 0.0% 3,450 -7% 500 540%Antwerp - Skaw Trip US Gulf 3,300 3,300 0.0% 3,200 3% 4,600 -28%USG Trip Skaw - Passero 18,250 17,350 5.2% 15,750 16% 23,250 -22%Source: SSY, ICAP. Italic entries are estimates

Freight Indices

Market Outlook Pacific and Atlantic capsize activity was notably strong this week with the majority of support stemming from increased enquiries from the Atlantic region, while Pacific rates recorded a modest uptick from participants in Western Australia. Market participants noted that premiums were paid for the size and arrival time of ships. Following trends seen in capsize activity, the Panamax markets also recorded upward momentum this week. The majority of the impetus came on an increase in the amount of enquiries from the North Atlantic. Activity in the Pacific market showed resilience over the past week as the market remained strong, despite a fall in demand as Chinese holidays took place. While activity was muted in Hong Kong and China, spot vessel activity remained supported.

After falling for the past three weeks, the India/Pacific handymax market showed modest signs of stabilisation. Unlike the panamax market, MBR understands that Chinese holidays earlier this month affected handymax activity in the Pacific market. Firm trade activity was noted on the US East Coast markets with steel and scrap cargoes and increased USG activity with grain. The handysize market performed well this week with most support stemming from an increase in activity from the Atlantic Basin. Increased scrap and fertiliser activity in the North Baltic market added support to the handysize market. Similarly, the handysize market in China and southeast Asia was supported by activity from steel trade.

Index This

weekPrice direction

Baltic Dry 900 Baltic Capesize 1,537 Baltic Panamax 859

200

700

1,200

1,700

2,200

2,700

Apr 12 Jun 12 Aug 12 Oct 12 Dec 12 Feb 13 Apr 13 Jun 13

Baltic Capesize Index (BCI)

Baltic Panamax Index (BPI)

Baltic Supramax Index (BSI)


Key Global Economic Indicators

Unit 2011 2012 2012 Q2 2012 Q3 2012 Q4 Feb-13 Mar-13 Apr-13JapanIndustrial production y/y % -2.3 -0.7 5.3 -4.6 -6.7 -5.1 -5.4 -3.7Motor vehicle production y/y % -12.3 33.9 84.5 3.0 -12.7 -15.1 -16.4 -6.5CPI y/y % -0.3 0.0 0.2 -0.4 -0.2 -0.6 -0.9 -0.7Construction: new build started y/y % 4.3 5.3 2.9 2.6 12.9 9.4 15.0 13.7 ChinaIndustrial production: MV y/y % 2.5 8.7 15.6 10.2 4.2 -16.4 13.1 15.6PMI:Mfg N/A 51.4 50.8 51.3 49.7 50.5 50.1 50.9 50.6CPI y/y % 5.4 2.7 2.9 1.9 2.1 3.2 2.1 2.4FDI: y/y construction y/y % 41.44 55.21 50.2 30.5 23.0 -39.0 -23.9 -10.0

Industrial production1 y/y % 13.7 10.8 9.5 9.1 10.0 0.0 8.9 9.3USAIndustrial production y/y % 2.5 3.7 4.6 3.3 2.8 2.3 3.0 1.8 Automobile production y/y % 51.4 39.0 53.8 41.5 17.2 5.0 5.9 15.6 Inventories: sales ratio N/A 5.4 2.6 2.3 2.5 2.4 2.4 2.6 2.8 Private housing starts y/y % 5.2 28.8 28.5 25.2 36.7 33.0 43.6 14.7 CPI y/y % 13.7 3.7 1.9 1.7 1.9 2.0 1.5 1.1 ISM: manufacturing PMI N/A 55.2 51.8 52.5 50.9 50.6 54.2 51.3 50.7 EUIndustrial production y/y % 3.2 -2.0 -1.9 -1.9 -2.8 -2.6 -1.3 0.50- Construction production y/y % -0.1 -4.9 -4.7 -5.2 -5.9 -0.7 -8.0 - CPI y/y % 2.7 2.5 2.4 2.6 2.3 1.8 1.7 1.2BrazilIndustrial production y/y % 0.4 -2.7 -4.5 -2.2 -0.5 -0.8 0.9 3.47 Mfg: capacity utilisation (SA) % 82.1 81.3 81.0 81.0 81.2 - - - CPI y/y % 6.6 5.4 5.0 5.2 5.6 6.3 6.6 6.5RussiaIndustrial production y/y % 4.8 2.5 2.2 2.4 1.6 -2.2 2.5 2.17 Fixed capital investment y/y % 15.8 16.4 18.4 13.2 9.6 5.9 6.3 5.97 CPI y/y % 8.5 5.1 3.8 6.0 6.5 7.3 7.0 7.2IndiaIndustrial production y/y % 4.8 0.8 -0.1 0.4 2.3 0.5 3.4 2.25 Industrial production: mining y/y % -1.7 -1.4 -1.7 -0.6 -2.9 -7.6 -2.7 3.04- Motor vehicle production y/y % 16.6 4.7 8.2 -2.4 2.1 -3.3 -8.7 -2.2Foreign inward investment: direct y/y % 122.6 19.4 -52.7 32.6 -10.9 -3.0 14.5 26.30 WPI y/y % 9.5 7.5 7.5 7.9 7.3 7.3 5.7 4.9GermanyIndustrial production y/y % 8 -1 -1.0 -1.8 -2.8 -5.1 -8.7 8.00 Motor vehicles y/y % 14 1 1.8 1.7 -4.6 -10.9 -5.5 12.70 Construction: new builds started unit 2,151 2,048 2229 2235 1972 1,730 1,970 2,328.00 FranceIndustrial production y/y % 2 -2 -3.9 -1.7 -2.5 -6.4 -4.1 2.63 Construction: new building started sq m '000 2,282 1,989 1863 1994 2079 2,042 2,496 2,166.80 UKIndustrial production y/y % -1.2 -2.5 -2.2 -2.5 -2.3 -5.7 -5.1 2.51 Vehicle production: passenger y/y % 5.5 9.6 16.9 2.5 5.9 -0.7 -6.3 16.6Vehicle production: commercial y/y % -1.6 -5.8 -8.0 -1.1 -5.8 -17.1 -18.7 -3.3CPI y/y % 4.5 2.8 2.7 2.4 2.7 2.8 2.8 2.4ItalyIndustrial production y/y % 1.4 -6.5 -7.3 -5.1 -7.0 -4.0 -5.3 - IP: motor vehicles, trailers and semi trailers y/y % 1.5 -16.2 -15.0 -18.3 -15.9 -27.0 -6.2 - CanadaIndustrial production y/y % 2.6 1.4 2.0 1.7 0.5 - - - PMI % 59.3 58.4 57.9 64.2 49.3 51.6 64.4 50.9TurkeyIndustrial production y/y % 9.2 2.3 3.2 1.8 1.4 1.52 0.15 4.60 Motor vehicle production y/y % 9.4 -9.9 -8.4 -15.5 -9.5 -2.5 -3.7 4.5CPI y/y % 6.5 8.9 9.4 9.0 6.8 7.0 7.3 6.1MexicoIndustrial production y/y % 4.0 3.2 3.9 3.9 1.7 1.1 0.5 2.10- Motor vehicle production y/y % 13.2 9.2 10.1 8.6 10.7 1.6 -11.2 15.63 Construction output MXN mn 15,987.1 17,129.6 16,727 17,304 18,323 15,912.5 15,517.42 - South KoreaIndustrial production y/y % 7.0 1.1 1.2 -1.0 -0.1 -9.5 -2.9 1.69 Motor vehicle production y/y % 9.3 -1.6 -1.2 -14.4 -2.0 -19.9 -13.1 -2.5Buildings commenced y/y % 5.7 -2.7 -2.5 -5.8 -13.8 -22.6 -12.9 4.32

Sources: CEIC. Notes: SA: seasonally adjusted, CPI: Consumer Price Index, PMI: Purchasing Managers Index, FCI: Fixed Capital Investment. e denotes a quarter-to-date value. 1 For chart purposes, the January data point for Chinese Industrial Production is calculated as an average of the December and February value.

Selected demand indicators

-20

-10

0

10

20

30

40

Apr 10

Jul 10

Oct 10

Jan 11

Apr 11

Jul 11

Oct 11

Jan 12

Apr 12

Jul 12

Oct 12

Jan 13

Apr 13

Industrial production (y/y %)

Japan USA Germany China

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Apr 10

Jul 10

Oct 10

Jan 11

Apr 11

Jul 11

Oct 11

Jan 12

Apr 12

Jul 12

Oct 12

Jan 13

Apr 13

Consumer Price Index (y/y %)

USA EU 27 China

-100

-50

0

50

100

150

200

Apr 10

Jul 10

Oct 10

Jan 11

Apr 11

Jul 11

Oct 11

Jan 12

Apr 12

Jul 12

Oct 12

Jan 13

Apr 13

Motor vehicle production (y/y %)Japan USA

Germany South Korea

6.0

6.3

6.5

6.8

7.0

1.0

1.2

1.4

1.6

1.8

Jun 10

Sep 10

Dec 10

Mar 11

Jun 11

Sep 11

Dec 11

Mar 12

Jun 12

Sep 12

Dec 12

Mar 13

Jun 13

Foreign exchange

USD/GBP USD/EUR RMB/USD [RHS]



Steel Raw M

aterials: Weekly M

arket Tracker / Issue 277 / 18 June 2013

Published weekly by Metal Bulletin LtdISSN 1756-1981

Produced by: Amy Bennett, Andy Cole, Ginger Ding, Kimberly Leppold, Brad MacAulay, Alistair Ramsay, Atilla Widnell, Xaiolei Xu

Editor: Kimberly Leppold [email protected]

Metal Bulletin Research Nestor House, Playhouse Yard London EC4V 5EX

Tel: +44 20 7827 6488 Fax: +44 20 7827 6430

For subscription enquiries contact: Tel: +44 20 7779 7999

Other MBR reports available include:l Seamless Steel Tube and Pipe

Market Trackerl Welded Steel Tube and Pipe

Market Trackerl Steel Weekly Market Trackerl Coated Steels Market Trackerl Stainless Steels Market Trackerl Ferro-alloys Market Tracker

To receive a free sample of any of the above reports, or for subscription enquiries,email your details to [email protected]

DISCLAIMER - IMPORTANT PLEASE READ CAREFULLYThis Disclaimer is in addition to our Terms and Conditions as available on our website and shall not supersede or otherwise affect these Terms and Conditions.Prices and other information contained in this publication have been obtained by us from various sources believed to be reliable. This information has not been independently verified by us. Those prices and price indices that are evaluated or calculated by us represent an approximate evaluation of current levels based upon dealings (if any) that may have been disclosed prior to publication to us. Such prices are collated through regular contact with producers, traders, dealers, brokers and purchasers although not all market segments may be contacted prior to the evaluation, calculation, or publication of any specific price or index. Actual transaction prices will reflect quantities, grades and qualities, credit terms, and many other parameters. The prices are in no sense comparable to the quoted prices of commodities in which a formal futures market exists.

Evaluations or calculations of prices and price indices by us are based upon certain market assumptions and evaluation methodologies, and may not conform to prices or information available from third parties. There may be errors or defects in such assumptions or methodologies

that cause resultant evaluations to be inappropriate for use. Your use or reliance on any prices or other information published by us is at your sole risk. Neither we nor any of our providers of information make any representations or warranties, express or implied as to the accuracy, completeness or reliability of any advice, opinion, statement or other information forming any part of the published information or its fitness or suitability for a particular purpose or use. Neither we, nor any of our officers, employees or representatives shall be liable to any person for any losses or damages incurred, suffered or arising as a result of use or reliance on the prices or other information contained in this publication, howsoever arising, including but not limited to any direct, indirect, consequential, punitive, incidental, special or similar damage, losses or expenses.

We are not an investment advisor, a financial advisor or a securities broker. The information published has been prepared solely for informational and educational purposes and is not intended for trading purposes or to address your particular requirements. The information provided is not an offer to buy or sell or a solicitation of an offer to buy or sell any security, commodity, financial product, instrument or other investment or to participate in any particular trading strategy. Such information is intended

to be available for your general information and is not intended to be relied upon by users in making (or refraining from making) any specific investment or other decisions. Your investment actions should be solely based upon your own decisions and research and appropriate independent advice should be obtained from a suitably qualified independent advisor before making any such decision.

Copyright Notice: © Metal Bulletin Ltd 2013All rights reserved. No part of this publication (text, data or graphic) may be reproduced, stored in a data retrieval system, or transmitted, in any form whatsoever or by any means (electronic, mechanical, photocopying, recording or otherwise) without obtaining Metal Bulletin Ltd’s prior written consent.

Unauthorised and/or unlicensed copying of any part of this publication is in violation of copyright law. Violators may be subject to legal proceedings and liable for substantial monetary damages per infringement as well as costs and legal fees.

For information about copyright licenses please contact Simon Gates on COPYWATCH in the UK on +44 (0) 20 7827 6481. Brief extracts may be used for the purposes of publishing commentary or review only provided that the source is acknowledged.

Documents

Steel Raw Materials: Weekly Market Tracker