ASA Materials Market Digest

ASA Materials Market Digest for October, 2012 Published monthly by the American Supply Association ● Jim Olsztynski, Editor (630) 467-0000 ● info@asa.net ● www.asa.net

In the Spotlight: Scarce Metals; Scarce Manufacturers Shortages loom for critical metals used by key industries. These include:  Beryllium, used in military equipment and the aerospace industry;  Cobalt, a material used in industrial manufacturing;  Tantalum, used in mobile phones, computers and automotive electronics;  Fluorspar, used in construction, cement, glass, iron and steel castings; and  Lithium, used in wind turbines and lithium-ion batteries in hybrid cars.

Business leaders in automotive, chemicals and energy sectors fear they will be hit hardest over the next five years. Growing demand and geopolitics were generally cited as bigger factors than the exhaustion of reserves as the most important drivers of scarcity. Click here to learn more.

Carbon Steel Global crude steel production dropped 1 percent in August, although U.S. output rose 1.2 percent, according to the World Steel Association.

U.S. manufacturing contracted in August for only the third time since July, 2009, according to the Institute for Supply Management’s authoritative PMI. The Purchasing Managers Index dropped to 49.6 percent, with anything below 50 indicating contraction as opposed to expansion. It adds fuel to widespread perception that the global economy is slowing down.

Flat steel product prices are expected to show no significant increase during the remainder of 2012, according to MEPS. Low raw material costs and restrained demand are the cause. MEPS’ preliminary outlook for 2013 holds the probability of some upswing, but who really knows?

Raw steel imports declined 11 percent in August from July, while finished steel imports dropped 13 percent, according to the American Iron and Steel Institute. However, annualized imports totals would be up 20 percent (raw) and 22 percent (finished), respectively.

Stainless Steel Higher nickel prices led to the first surcharges from major domestic mills since March. Several other attempts have led to pullbacks, but market sources appear to suspend disbelief and think this time the increases will stick because the stainless market

Copyright, 2012, American Supply Association. All rights reserved.

Page 1 of 6

The ASA Materials Market Digest is published as a member service of the American Supply Association. Its contents are solely for informational purposes and any use thereof or reliance thereon is at the sole and independent discretion and responsibility of the reader. While the information contained in this report is believed to be accurate as of the date of publication, ASA and the author disclaim any and all warranties, express or implied, as to its accuracy and completeness.

appears to have struck bottom. Shipments of stainless steel rose 12.4 percent in August from the previous month but were still down 5.1 percent from August, 2011, according to the Metals Service Center Institute (MSCI). Look for more increases in October, say industry insiders, including on Type 304, which has been sluggish compared to less widely used grades.

Global stainless steel production was stable in the first half of 2012 with a slight decrease of just 0.2 percent compared with the first half of 2011, according to preliminary figures released by the International Stainless Steel Forum (ISSF).

U.S. stainless steel consumption rose 5.6 percent in the first half of the year, according to the latest figures from the Specialty Steel Industry of North America (SSINA).

Imports jumped 11.6 percent in the same period.

The preliminary outlook for 2013 is for flat demand and lower nickel prices.

Imports continue to weigh heavily on the stainless marketplace, even amid sluggish demand. Excess capacity in China will make it challenging for domestic producers to raise prices.

Tubular Products Oversaturation and sluggish demand continue to plague most tubular sectors as the third quarter drew to a close. Prices for most steel pipe and tube products dropped in September. Lower scrap prices also served as a drag on the market. According to various market sources, welded products, in particular, are in for some tough times. Even the redhot energy sector has been weakened by ultra-low natural gas prices that have led to gas drilling cutbacks.

Mexico’s giant Tubacero will be adding to the pipe glut with plans to build a $90 million, 200-ton-per-year spiral weld steel pipe mill in its home country. It will be the company’s sixth carbon steel pipe plant.

Allied Tube & Conduit Corp. and TMK IPSCO filed a scope inquiry with the U.S. Commerce Department’s International Trade Administration (ITA) in an anti-dumping duty administrative review on circular welded non-alloy steel pipe from Mexico. The review covers imports for the period spanning November 1, 2010, to December 31, 2011.

The ITA also rescinded the administrative review of an anti-dumping duty order on circular welded carbon steel pipe and tube from Taiwan at the request of petitioner U.S. Steel Corp. The review covered Chung Hung Steel Corp., Kao Hsing Chang Iron & Steel Corp., Shin Yang Steel Co. Ltd. and Tension Steel Industries Co. Ltd. The ITA postponed by 120 days to January 30 the preliminary results in a countervailing duty administrative review of certain OCTG imports from China from January 1 to December 31, 2011, citing numerous new subsidy allegations. The review covers Jiangsu Chengde Steel Tube Share Co. Ltd. and Wuxi Seamless Oil Pipe Co. Ltd.

Copyright, 2012, American Supply Association. All rights reserved.

Page 2 of 6

The ASA Materials Market Digest is published as a member service of the American Supply Association. Its contents are solely for informational purposes and any use thereof or reliance thereon is at the sole and independent discretion and responsibility of the reader. While the information contained in this report is believed to be accurate as of the date of publication, ASA and the author disclaim any and all warranties, express or implied, as to its accuracy and completeness.

U.S. Pipe & Tube Imports Landed duty-paid value (in $1,000s)

7,808,597

% Change YTD 40.6%

% Change 2007-11 5.8%

1,102,725

1,425,017

29.2%

45.7%

2,612,205

1,455,959

2,111,322

45.0%

58.9%

2,253,821

1,308,072

1,946,036

48.8%

-49.4%

Welded OCTG

1,556,185

853,562

1,249,255

46.4%

153.0%

Flanges, Fittings & Tool Joints

1,239,362

672,493

938,712

39.6%

29.0%

Stainless Seamless Tubular Products

920,190

523,279

545,243

4.2%

-3.1%

Stainless Welded Tubular Products

438,209

249,025

279,300

12.2%

-30.9%

Stainless Flanges, Fittings & Tool Joints

558,825

290,626

395,785

36.2%

2.8%

Annual & Year-To-Date Data from January-June 2012

2011

YTD 2011

YTD 2012

Total Carbon and Alloy Pipe & Tube

9,898,742

5,555,406

Carbon Seamless Tubular Products (Other than OCTG)

1,965,444

Carbon Seamless OCTG Welded Tubular Products (Other than OCTG)

Source: U.S. International Trade Commission / U.S. Department of Commerce

Copper Copper prices were trending toward a 10 percent jump in 3Q12 from the prior quarter, at the time of this writing. Despite sluggishness in the key American and Chinese economies, the red metal was boosted by unmistakable signs of improvement in the U.S. housing market and, perhaps, from speculators figuring it had nowhere to go but up.

However, a pullback was becoming noticeable during the last week of September. After hitting a 4-1/2 month peak in mid-month selling for $8,422 on the London Metal Exchange (LME), copper closed at $8,120 on Sept. 27th.

China’s copper demand will grow only 4.2 percent this year, which is down from an original forecast of 5 percent, according to a report from China International Capital Corp.

Reports abound of huge copper stockpiles in Chinese warehouses.

The ITA nailed Mexico’s GD Affiliates S de RL de CV with a 5.53 percent weightedaverage dumping margin for seamless refined copper pipe and tube sold in the U.S. from November 22, 2010, to April 30, 2011.

Scrap 2012 has been a year of wildly gyrating ferrous scrap markets, with prices dropping as much as $100 per ton, in some cases, during the summer months before recovering most, though not all, of the decreases by the end of August, only to find $15-30 drop-offs again in September. Early indications are for more declines in October.

Stainless scrap prices are holding up better, thanks to firming nickel prices on the London Metal Exchange (LME). It’s a speculative environment, however, with mills

Copyright, 2012, American Supply Association. All rights reserved.

Page 3 of 6

The ASA Materials Market Digest is published as a member service of the American Supply Association. Its contents are solely for informational purposes and any use thereof or reliance thereon is at the sole and independent discretion and responsibility of the reader. While the information contained in this report is believed to be accurate as of the date of publication, ASA and the author disclaim any and all warranties, express or implied, as to its accuracy and completeness.

experiencing sluggish demand but looking for good deals. Many observers think the small rally will peter out soon.

Many scrap yards are resorting to ATM machines to photograph and record transactions in order to stay on the right side of the law during increased scrutiny of scrap metals purchases.

Plastics Months of sluggishness finally gave way to some increase in plastic resin prices during August. Prices of PE and PS rose in August, and PVC prices were set to move up after having dropped steadily since May, according to Plastics Technology magazine. Rising feedstock costs were cited as the main reason.

Recycled plastic prices continued to plummet, however, according to the same publication, especially Recycled HDPE.

News of Note The American Supply Association’s industrial P-V-F members continued to enjoy double-digit sales gains, realizing a 12.1 percent increase in August, 2012, versus August, 2011. On a rolling 12-month basis from August to August, they averaged 11.7 percent more in sales volume.

The cost of key construction materials increased 0.9 percent in August and 1.0 percent year-to-year, according to an analysis of Producer Price Index (PPI) figures by the Associated General Contractors of America. A few materials posted substantial declines for the month and year. Prices for copper and brass mill shapes dropped one percent for the month and are now down 14 percent year-to-year. The index for steel mill products fell by 2.5 percent compared to July, 2012, and is down 8.2 percent compared to August, 2011.

Refer to the table at the end of this report that shows PPI performance for more than two dozen P-V-F and plumbing product categories.)

Elkay Manufacturing Co. has asked the ITA to extend its deadline for a final determination in an anti-dumping investigation of imports of drawn stainless steel sinks from China. The company said it needs additional time to file comments. The original deadline was December 11.

Construction activity is at an all-time high for the mining industry. Some $1.3 trillion in projects are under various stages of planning and development around the world, according to www.industrialinfo.com.

ASA’s Industrial Piping Division has named Anvil International sales executive, John Martin, as the recipient of its coveted IPD Award of Excellence for 2012. The award will be presented later this month during the Weldbend IPD Breakfast at the annual ASA Nearly 90 wholesaleconvention, NetworkASA 2012: OWN IT, in Orlando, Florida.

Copyright, 2012, American Supply Association. All rights reserved.

Page 4 of 6

The ASA Materials Market Digest is published as a member service of the American Supply Association. Its contents are solely for informational purposes and any use thereof or reliance thereon is at the sole and independent discretion and responsibility of the reader. While the information contained in this report is believed to be accurate as of the date of publication, ASA and the author disclaim any and all warranties, express or implied, as to its accuracy and completeness.Â

distributor firms from across the United States and throughout the industry will have representatives attending this event.

About Jim Olsztynski

For 35 years, Jim Olsztynski has covered the plumbing-heating-cooling-piping and industrial and mechanical pipe-valves-fittings (PHCP-PVF) industry as an award-winning journalist and editor for a variety of industry publications. He is an accomplished author having published several Essentials courses for ASA University as well as his own book, entitled: Bumps on the Road to Riches: How to Avoid Big Mistakes that Kill Small Businesses. Jim has also made numerous appearances and presentations about the industry and its rich history before live audiences as well as on television.

Copyright, 2012, American Supply Association. All rights reserved.

Page 5 of 6

The ASA Materials Market Digest is published as a member service of the American Supply Association. Its contents are solely for informational purposes and any use thereof or reliance thereon is at the sole and independent discretion and responsibility of the reader. While the information contained in this report is believed to be accurate as of the date of publication, ASA and the author disclaim any and all warranties, express or implied, as to its accuracy and completeness.Â

Producer Price Index • Key Industry Products Pipe, Valves & Fittings Metal valves, except fluid power

Product Code

July 2012

August 2012

% Change

% Change Aug. 2011

1149-02

277.0

276.0

-0.4

4.7

Gates, globes, angles & check valves

1149-0201

316.8

316.8

-0.2

3.1

Ball valves

1149-0202

320.6

319.9

-0.2

10.9

Butterfly valves

1149-0203

197.4

196.4

-0.5

2.8

Industrial plug valves

1149-0204

213.4

205.6

-3.7

1.0

Plumbing & heating valves (low pressure)

1149-0205

276.1

N/A

N/A

N/A

Solenoid Valves

1149-0208

279.9

N/A

N/A

N/A

Other industrial valves, including nuclear

1149-0209

257.2

254.0

-1.2

5.9

Automatic valves

1149-0211

156.2

156.2

0.0

3.0

Steel pipe & tube OCTG, standard, line pipe, carbon

1017-06

282.2

275.3

-2.4

-0.8

1017-0671

121.4

115.2

-5.1

0.3

Steel pipe & tube, alloy

1017-0673

110.1

109.5

-0.5

3.6

Steel pipe & tube, stainless steel

1017-0674

103.2

103.4

0.2

-2.9

Metal pipe fittings, flanges and unions

1149-0301

300.4

300.4

0.0

1.7

Copper & copper-base alloy pipe and tube

1025-0239

207.3

205.8

-0.7

-21.1

Plastic pipe

0721-0603

102.9

102.8

-0.1

0.6

Plastic pipe fittings & unions

0721-0604

135.2

135.2

0.0

2.3

1054-02

279.5

279.4

0.0

1.2

Plumbing Fixtures, Fittings & Trim Vitreous china fixtures

1052

147.2

N/A

N/A

N/A

Bath & shower fittings

1054-0211

224.5

224.5

0.0

0.2

Lavatory & sink fittings

1054-0218

139.6

139.6

0.0

1.8

Miscellaneous brass goods

1054-0223

290.5

290.2

-0.1

1.8

1056

201.1

201.8

0.3

1.0

1061

261.1

261.1

0.0

3.9

Cast iron heating boilers, radiators and convectors

1061-0106

164.9

164.9

0.0

3.2

Steel heating boilers, all classes

1061-0112

166.4

166.4

0.0

6.3

1066-01

337.9

338.3

0.1

4.7

Enameled iron & metal sanitary ware Steam & Hot Water Equipment

Domestic water heaters Electric water heaters

1066-0101

320.9

320.9

0.0

4.6

Non-electric water heaters

1066-0114

212.3

212.7

0.2

4.8

32

97.1

97.7

0.6

-1.6

Warehousing, Storage & Related Services

Source: U.S. Department of Commerce Bureau of Labor & Statistics

Copyright, 2012, American Supply Association. All rights reserved.

Page 6 of 6

The ASA Materials Market Digest is published as a member service of the American Supply Association. Its contents are solely for informational purposes and any use thereof or reliance thereon is at the sole and independent discretion and responsibility of the reader. While the information contained in this report is believed to be accurate as of the date of publication, ASA and the author disclaim any and all warranties, express or implied, as to its accuracy and completeness.Â