Industrial Piping Division Quarter 2

HEADQUARTERS 1200 N. Arlington Heights rd.

Suite 150 itasca, IL 60143

Tel: 312.464.0090 fax: 312.464.0091

web: asa.net IPD@asa.net

2Q12 IPD Commodity reports The IPD COMMODITY REPORTS are prepared quarterly in February, May, August & November by the members of the IPD Executive Council

ROUTE TO

This report is published as a member service of the American Supply Association’s Industrial Piping Division (IPD). 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, its IPD and the authors disclaim any and all warranties, express or implied, as to its accuracy and completeness. © 2012 American Supply Association. All Rights Reserved.

© 2012 American Supply Association. All Rights Reserved.

iQ12 IPD Commodity Reports

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1

CARBON STEEL PIPE Import Carbon Steel Pipe “Strange” is a word commonly used to describe current happenings in the import carbon steel ERW pipe market.

There is a genuine push on the HRC/vendor side to raise prices in response to increased material costs mostly due to foreign currency fluctuations and transportation increases, but they are not holding because of the softness in the U.S., China and European markets. Additionally, the softness in Europe and China is allowing for an increase in the amount of HRC available to ship to pipe manufacturers around the world further adding to the price softness.

There is decent demand for pipe, but it is not excellent by any means. The OCTG “bubble” in the Gulf Coast is beginning to show some cracks. There is an immense amount of speculative pipe purchases pouring into Houston on every vessel, and it would seem to have reached a level where demand has been exceeded for said products. OCTG prices are being forced down due to the oversupply, which is forcing line pipe prices down concurrently.

This pattern of bouncing back and forth has gone on for better than two years, and it does not seem to be changing. We see ERW Grade B line pipe floating within a range of $930/ST - $990/ST for the foreseeable future, and Grade A black pipe is not too far behind. Based on the cost of scrap steel, the pricing should be in the $900/ST area, but transportation costs are pushing prices higher. If there were a substantial reduction in fuel costs, or a further softening in demand, pricing will decrease.

As we get closer to this fall’s general election with so much riding on it, it is impossible to tell how this might impact demand running up to November. Also, with the depressed price of natural gas, a number of large production and exploration companies are temporarily suspending further drilling until such time as prices come off the floor.

One potential wild card that could drive the pricing of commodities and tangible assets upwards is the continued debasement of the USD. As markets show their inherently weak structure, and the Treasury has more and more trouble selling its bonds to real buyers (61% of Treasury Bills were purchased by the Federal Reserve with printed money over the last 12 months), we might see an increase in quantitative easing from the Federal Reserve. This newly introduced liquidity will have an inflationary impact, which will further weaken the USD measured against anything real. This whole scenario could be countered by the collapse of the Euro if Greece, Italy or Spain were to default.

The balance of this year should be most interesting.

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1Q12 IPD Commodity Reports

Domestic Carbon Steel Pipe & Overview Overall pipe demand picked up in 1Q12. The average HR coil cost fluctuated throughout the quarter and settled out $20/ton lower at the end of March from where it began at the close of last year. Customers are reporting a 15% growth in sales during the quarter but are unsure of its sustainability through year end. Non-residential construction is still flat with no growth projected in 2012. The domestic (on-shore) oil and gas industry continues to see strong demand with the shale plays at the Marcellus, Eagle Ford and Bakken. Demand for pipe products in the hydrocarbon market remains robust. Mill deliveries are out into 3Q12 for LP and OCTG products.

The Institute for Supply Management reported that economic activity in the manufacturing sector expanded in April for the 33rd consecutive month, and the overall economy grew for the 35th consecutive month. The PMI registered 54.8%, an increase of 1.4 percentage points from March’s reading of 53.4%, indicating expansion in the manufacturing sector for the 33rd consecutive month.

Sixteen of the 18 industries reflected overall growth in April, and the New Orders, Production and Employment Indexes all increased indicating growth at faster rates than in March.

The Prices Index for raw materials remained at 61% in April - the same rate as reported in March. Comments from the panel generally indicate stable to strong demand with some concerns cited over increasing oil prices and European stability.

Of the 18 manufacturing industries, 16 are reporting growth in April, including: Furniture & Related Products; Printing & Related Support Activities; Machinery; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Primary Metals; Paper Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Chemical Products; Fabricated Metal Products; Computer & Electronic Products; and Petroleum & Coal Products. The only industry reporting contraction in April is Wood Products.

Inventories for both raw material and finished goods are at good levels throughout the supply chain. This remains a good sign and will aid in a sustained recovery as demand picks up.

Pricing for domestic seamless pipe products has remained stable throughout, but ERW pipe pricing for 6” and under has been volatile with smaller producers fighting over market share. This volatility should subside with the closing of the Allied Tube Plant in Morrisville, Pennsylvania. Pricing in the 8” and above ERW market continues to be stable. However, with the lack of demand in the construction and fabricator markets, large OD pipe shipments still have yet to recover. Although the manufacturing sector is up, the market for non-residential © 2012 American Supply Association. All Rights Reserved.

construction still remains at abysmal levels. This market is one of the key markets for the standard pipe product, and it continues to shrink with no turn-around projected in 2012.

The AMM HR sheet index closed out in 1Q12 at $680/ton, which was $20/ton lower than the December 2011 closing figure ($700/ton). During 1Q12, HRC has risen $50/ton and fallen $70/ton. With the wild swings in HRC cost over the years, customers are not making any speculative purchases and only fill holes while also maintaining low inventory levels.

CARBON STEEL FITTINGS & FLANGES Carbon Forged Steel Fittings Forged steel fittings prices continue to be stable with no price movement projected over the summer. Special Bar Quality (SBQ) hot rolled steel bar base costs plus scrap are expected to remain relatively constant. Timken and Gerdau SA recently announced expansions to increase SBQ capacity, and other mills around the globe are doing the same, which is anticipated to offset future stronger demand levels.

Competition among well-established manufacturers and suppliers will also keep the pressure on prices.

Demand continues to be strong due primarily to the increased activity on the average number of oil drilling rigs. PVF wholesalers and suppliers are reporting forged steel fittings and related high pressure piping components are surpassing the high volume levels of 2008. We have seen demand increase steadily through 2010, 2011 and 2012 year-to-date.

The Institute for Supply Management stated that U.S. manufacturing growth in April recorded its 33rd consecutive © 2012 American Supply Association. All Rights Reserved.

monthly increase. Even the commercial sector is slowly coming back. One down side in the energy sector is low natural gas prices. Previously, the falling prices necessitated cutbacks in more remote locations like Haynesville and Barnett shale areas. More recently, drilling rigs are leaving the Marcellus shale area to be relocated to other oil shale areas, such as the Bakken North Dakota find. Overall this past month, U.S. drilling rigs are up 7%, and Canadian drilling rigs are up 6.5% percent compared to the previous year.

Service levels are good to excellent. The quality of relationships among supply chain partners and service providers is often the difference between failure and success. Supply chain disruptions can have dramatic financial consequences, and it is easy to forget to factor quality and service into your costs.

In summary, expect prices to remain constant and service levels good. Thus far in 2012, PVF sector activity has exceeded the industry’s expectations after coming off a stellar 2011.

Expect more of the same throughout the summer.

Carbon Welded & Seamless Pipe Nipples Welded pipe nipples prices increased an average of 5% during March and April, and manufacturers indicate the increase was primarily a result of raw material increases. The increase also applied to standard pressure fittings and merchant couplings.

Seamless pipe nipples prices remain stable with the last increase having occurred 12 months ago. Demand is forecast to remain strong due to steady growth in the PVF sector.

Service levels of welded and seamless pipe nipples remain excellent. iQ12 IPD Commodity Reports

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3

Carbon Steel Weld Fittings & Flanges Demand for carbon steel welding fittings and forged steel flanges continues to be strong and steady as we move into the second quarter. This demand is being bolstered by the robust activity in the petro-chemical, power, refinery, shale play and industrial sectors of our industry.

Commercial construction remains sluggish due to uncertainty in the economy, difficulty in obtaining financing and the reduction in government construction projects at federal, state and local levels.

Pricing for domestically produced commodity carbon steel welding fittings and flanges is expected to remain stable through the second quarter as costs and availability of raw materials have remained relatively stable. Pricing for certain size ranges of offshore commodity fittings have experienced price increases of up to 25% in the distribution sector of our industry.

Regular monitoring of the market is suggested as global uncertainty and volatility could shock the markets for raw materials and energy. In part, this volatility has impacted an Asian offshore manufacturer of welding fittings and pipe to declare bankruptcy.

In recent weeks, shortages of intermediate size commodity carbon steel welding fittings have been experienced in some sectors of the industry adding additional pressure on the domestic manufacturers. Domestic production adjustments have been implemented that should correct the issue within a few weeks.

The industry is experiencing an increase in demand for domestically produced products predicated on concerns for consistent quality, increases in transportation costs for offshore product, extended lead time and liability issues.

Related to the aforementioned concerns, it is alleged that a grooved product manufacturer has been shipping product into Mexico as made in the USA even though the product, either in part or whole, came from China. This is an ongoing legal issue in Mexico and should be monitored for knowledge and precaution.

Cautious optimism for the third and four quarters that the demand we now experience will continue at the current pace is being expressed by key players in the distribution industry.

Continued sluggishness in the commercial construction industry, political uncertainty, restrictive and punitive regulations on coal, fracking, pipeline and nuclear industries, along with tax policy concerns, are factors influencing the future health of our industry.

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1Q12 IPD Commodity Reports

STAINLESS STEEL PIPE, FITTINGS & FLANGES The first quarter turned out to be a tale of two very different halves for nickel. The last issue of this report was released near the middle of the quarter when rising stainless surcharges was stoking particularly heavy seasonal restocking. The most important alloying ingredient in austenitic (300-series) stainless steels was in the process of posting year-to-date highs and spot prices touched $9.90/lb. - nearly 20% higher than where they ended 2011 - as traders temporarily ignored the oversupply concerns that had weighed heavily on prices throughout the fourth quarter. Due to the fact that roughly two thirds of nickel is used to produce stainless steels, significant variations in supply and demand projections for stainless tend to exaggerate nickel’s value. And, as China goes, so goes general investor sentiment - China alone accounts for almost 50% of the world’s production of stainless steel and nearly 44% of world nickel demand. So, when the nation’s general inflation figures started falling below its government’s projections towards the middle of February, nickel’s fundamental outlook and price levels began to sour. On the last day of the quarter, nickel was trading $2.00/lb off its peak; April’s monthly average drifted 4.34% lower than March’s and matched November’s, which was the worst month of the worst quarter since 2009. The practically requisite volatility has been largely absent lately and prices were constrained at the lower end of its $7.88 to $8.35 range since the last week of March. But then, renewed fears regarding the euro zone debt crisis emerged in May, and this year’s price gains for virtually all commodities were wiped out and ushered nickel to its lowest level since December, 2009. Currently, nickel is below some producers’ marginal costs of production, and most analysts expect extended periods at these levels to invoke sizeable production cuts, which should, in turn, generate increased speculative interest and bolster prices.

Timing is Everything Prior to the broad-based commodity rout, nickel’s weak fundamentals had just begun to look better based on a declaration signed by Indonesia’s Minister of Energy and Mineral Resources to begin immediate enforcement of a ban on exports of nickel (and 13 other mineral ores) that had been slated to take effect in 2014. After a period of confusing, somewhat contradictory reports, new policies were implemented on May 6th that initially imposed a 20% export tax for unprocessed ores. Indonesia’s low-grade ore accounted for approximately 14% of the total global output of nickel last year, and its government is doggedly focused on increasing investment in domestic processing. Some entities, like Vale Indonesia, will not be subject to the tax because they are already operating local smelters and refining ore before exporting, but the government has made it clear that they intend to renegotiate pending agreements, some of which © 2012 American Supply Association. All Rights Reserved.

© 2012 American Supply Association. All Rights Reserved.

Nickel pig iron may be the key to mid-term and possibly long-term nickel and austenitic stainless steel costs and prices. Analysts peg the total percentage of low-grade nickel ore processed by Chinese producers emanating from Indonesia at between 60% and 80%. Almost all of the balance is coming from the Philippines, and it is widely anticipated that producers there will adjust prices to coincide with the estimated 7-1/2% increase resulting from Indonesia’s export tax. However, the 20% export tax is viewed by some prominent analysts as a compromise against backlash from the Indonesian mining industry and simply the first step to be taken against exporters of unprocessed ores; a 50% tax is expected to be imposed sometime next year. The third and final step is complete prohibition against sending unprocessed ores out of the country. Nickel price bulls contend that these actions will inevitably increase the costs of low-grade ore to a point where NPI production volumes will decline significantly and stimulate demand for primary refined nickel – especially at or near current price levels – and bring the market back into balance. But the new RKEF technologies and other innovations should prove to enhance the resilience of this vital supply source to China. Moving forward, availability and manufacturing costs of NPI will be a major determinant in the ability of China’s manufacturers of pipe, fittings and flanges to maintain low-cost producer status of a majority of stainless steel commodities.

SURCHARGES FOR AUSTENITIC STAINLESS STEELS

5.000

304/L SURCHARGE

316/L SURCHARGE

4.500

4.000

3.500

3.000

2.500

2.000

1.500

1.000

0.500

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Apr 12

Dec 11 Feb

Aug

iQ12 IPD Commodity Reports

Oct 11

Jun 11

Feb 11 Apr 11

Dec

Oct 10

Jun

Aug

Apr 10

Dec 09 Feb

Oct 09

Jun

Aug

Apr 09

Dec 08 Feb

Oct 08

Jun

Aug

Feb

Apr 08

Dec

0.000 Oct 07

Yet another record for stainless steel production was set again in 2011 as global output rose 3.3% over 2010.

Despite increasing global macroeconomic headwinds, steel consultancy MEPS International forecasts a 6% annual increase for 2012, but it’s not clear what percentage of the stainless growth will be nickel-bearing. What is clear is that LME inventories of nickel peaked at 106,362 metric tons on May 9th, more than 18% higher than where they began the year. Price premiums for immediate delivery recently dropped to multiyear lows. The International Nickel Study Group (INSG) reports that the global nickel market posted a supply surplus of 26,700 metric tons in the first two months of this year, which is more than the total surplus registered during all of last year. INSG’s most recent forecast is for a 50,000 MT surplus for calendar year 2012. Analysis by the Portugal-based intergovernmental organization calls for world refined nickel output to increase by 5.6% over last year but forecasts global consumption to increase by 4.5%, which is the basis for their projected surplus. Recent reports that mining companies and refineries are producing more nickel than at any other time in history are certainly weighing on investor sentiment, particularly with Chinese import demand levels waning. Macquarie Bank of Australia recently suggested that the refined nickel market will remain in surplus for the next two years and preached prudence to miners with respect to planning output. But while the Chinese have only been producing significant volumes of nickel pig iron (NPI) for about the last five years, there are currently about 250 separate entities that turned out what various analysts estimate to be between 225,000 to 275,000 metric tons during 2011; aggregate 2011 production figures should prove to be an increase of at least 40% over 2010. Prior to the formal announcement of the Indonesian export tax, Macquarie reported that China’s total NPI output would increase by an additional 100,000 MT this year. Enhanced production techniques, including rotary kilns and electric arc furnaces (RKEF process) will provide the new supply brought on during 2012 and beyond with lower energy costs, which will largely offset much of the projected cost increases from the export tax and/or processing fees.

High Pressure Acid Leaching (HPAL) projects remain a wild card. Most of the undertakings from the much ballyhooed technology that promised large amounts of nickel at substantially lower costs compared to traditional mining from

Pig Power

Jun 07 Aug

Rising Supplies from Multiple Fronts

sulfide deposits have been besieged by multi-year delays and huge cost run-ups from technical problems. Ravensthorpe in Western Australia, Ambatovy in Madagascar and Goro in New Caledonia are three key projects to monitor closely throughout this year.

SURCHARGE (PER POUND)

that have been in place for decades. While it’s far too soon to predict the specific impact of Indonesia’s actions, they have the potential to put a significant dent in the supply of lowgrade ore that the Chinese use to process nickel pig iron (NPI).

The fact that virtually all of the demand growth for nickel in recent years has been captured by lower-cost NPI may serve to underpin prices in the second half of this year, but the degree and timing of any increases should be primarily predicated on how robust alleged Chinese stockpiles of NPI actually are.

Looking Ahead

INPUTS THAT IMPACT STAINLESS STEEL PRICES 90,000

34

150,000

32

140,000

30

130,000

28

120,000

26

110,000

24

100,000

22

90,000

20

80,000

18

70,000

16

60,000

14

50,000

12

40,000

10

30,000

8

20,000

6

10,000

4

0

2

6

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1Q12 IPD Commodity Reports

80,000

8,000

70,000

7,000

60,000

6,000

50,000

5,000

40,000

4,000

30,000

3,000

20,000

2,000

10,000

1,000

Apr 2012

Jun 2012

Feb 2012

Oct 2011

Dec 2011

Aug 2011

Apr 2011

Jun 2011

Feb 2011

Oct 2010

Dec 2010

Aug 2010

Apr 2010

Jun 2010

Feb 2010

Oct 2009

Dec 2009

Aug 2009

Apr 2009

Jun 2009

Feb 2009

Oct 2008

Dec 2008

Aug 2008

Apr 2008

Jun 2008

Feb 2008

Oct 2007

Dec 2007

Jun 2007

Aug 2007

0

The first quarter of 2012 has kept copper investors on their toes with the red metal inching its way ahead nearly 12% from a year ago. This increase is the biggest quarterly gain since the end of 2010. Uplifted by long-awaited optimism about the global economy, in particular the U.S. job market figures, copper has pushed ahead with expectations that the employment picture will continue to improve. Certainly, from the recently released U.S. Department of Labor information showing that weekly unemployment claims are falling to the lowest levels in four years, it can be perceived that the U.S. economy appears to have found its footing. Adding to the good news, housing prices have appeared to stabilize, and the latest factory index compiled by the Institute for Supply Management has risen to 53.4 indicating faster-than-expected expansion. All eyes in the market look ahead to the national jobs data that is released monthly for further clues to the trend.

On the other hand, confidence is somewhat lessened due to the Federal Reserve’s April disclosure that the U.S. is unlikely to receive further monetary easing any time soon with most major Wall Street firms seeing about a one in three chance.

Looking at copper’s worldwide picture, steady U.S. expansion has limited impact accounting for only 10% of the overall market.

Political Uncertainty in Europe Metals investment analysts are advising their clients to be aware of the dampening effects of Europe’s budget problems with unknown outcomes of upcoming elections in countries with seriously troubled economies. “Politics are, in our view, going to be a bigger risk to the base metals this year than has been the case, with elections in France, Greece, and the U.S., as © 2012 American Supply Association. All Rights Reserved.

SCRAP & CHROMIUM PRICES (M/T)

Chromium

COPPER TUBE & FITTINGS

CASH PRICE OF PRIMARY NICKEL (LBS)

36

160,000

18-8 SCRAP

0

LME CASH PRICE AVG (LB)

Jun 07 Jul 07 Aug 07 Sep 07 Oct 07 Nov 07 Dec 07 Jan 08 Feb 08 Mar 08 Apr 08 May 08 Jun 08 Jul 08 Aug 08 Sep 08 Oct 08 Nov 08 Dec 08 Jan 09 Feb 09 Mar 09 Apr 09 May 09 Jun 09 Jul 09 Aug 09 Sep 09 Oct 09 Nov 09 Dec 09 Jan 10 Feb 10 Mar 10 Apr 10 May 10 Jun 10 Jul 10 Aug 10 Sep 10 Oct 10 Nov 10 Dec 10 Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12

LME INVENTORY (MT)

LME INVENTORY (MT) 170,000

9,000 Molybdenum

MOLYBDENUM PRICES (M/T)

May surcharges are right at the December, 2011, levels - a signal that prices were bottoming out prior to this month’s commodity rout. If prices remain at this low/ unprofitable level, expect nickel miners to take real action to reduce output in order to maintain market price stability.

Besides the price and availability outlook for NPI, there are a few other major issues that will go a long way towards determining the outlook for nickel prices in the second quarter and beyond. The aforementioned Chinese stainless demand conditions are of paramount importance in addressing growing stockpiles and stimulating speculative attention. The political strife in Greece has brought negative focus back to the European debt mess and a resultant weakening of the Euro vs. the Dollar, which currently stands at a 3-1/2 month low. Since LME metals are traded in dollars, continued weakness will have a negative effect on prices.

Speaking of politics, results of the presidential election in the U.S. and the power transition in China may wind up serving as catalysts to improved fundamentals and justify price rebounds in industrial metals. The longer the recovery is taking to take hold in the U.S., the greater the prospect of implementing QE3, which would provide a real boost to industrial commodities. The transition of power in China coinciding with the World Bank’s forecast for the country’s lowest growth since 1999 looks to be causing the government to increase fiscal spending and loosen credit. And, regardless of the effect of nickel-price-limbo (how low can it go?), don’t look for significant movement of most finished stainless steel PVF products. Pipe prices have and will continue to show the most deterioration, but the higher the percentage of labor and energy costs allocated to a particular product (e.g. products made from castings have high percentages), the less room there is for further discounting. Moreover, chromium, the second most important alloying ingredient in 304 stainless, is approaching 3-1/2 year highs and also helping to buoy prices of finished products.

well as the hand over of power in China,” according to Gayle Berry, Barclays analyst, stated in a note to investors. Likewise, Michael Adams, head of research at FastMarkets.com, cautions his clients: “The economic climate, especially with all of the uncertainty Greece is causing, is likely to continue to weigh on the demand for metals.”

This advice is based on observations that the struggle in debt-buried Greece to form a coalition government by radical leftist Alexis Tsipras is jeopardizing budget cuts necessary to receive international bailout funds to pay its loans. Tsipras has declared the aid package null and void and called for a moratorium on debt payments to protect government programs that the Greek people have become rebelliously dependent upon. Fears of a potential default and exit from the Euro zone are unsettling to the market.

France also has the attention of the financial world as Socialist President-elect Francois Hollande has announced he is in favor of tackling the debt crisis with more emphasis on growth than reduced spending, which is likely to cause tension by being at odds with Germany’s insistence on financial austerity. The recent French election saw Nicolas Sarkozy defeated, making Hollande the first Socialist president in 17 years. That news immediately rattled the markets significantly and triggered a sell-off across the bourses.

As a region, Europe is second in global demand for industrial copper. In the last few months, prices have tracked the weakness in investor sentiment and consumption with the Euro zone’s ongoing debt crises. The most actively traded futures contract, for July delivery, was recently down 4.70 cents, or 1.3%, at $3.6305 a pound on the Comex division of the New York State Mercantile Exchange.

Chinese Demand Unclear China’s purchases of copper fell 5% in March from a year ago as stockpiles have grown to record levels rising to 227,276 tons in March, the highest since 2003. Plans are underway to begin selling off excess inventory, according to a recent article in the Financial Times. China’s number-one producer and smelter, Jiangxi Copper, stated that it will begin exporting large quantities of the metal to help ease the shortage of supply globally. A spokesperson for the nation’s copper industry

© 2012 American Supply Association. All Rights Reserved.

has announced that China will export an amount of copper sufficient to “regulate domestic and overseas market demand and supply.”

Because China consumes about 40% of the world’s copper, its movements have the potential to greatly impact the market. Trade data suggests the possibility of China’s red-hot economy slowing down. Surprisingly, the world’s second largest and fastest-growing economy is quite vulnerable to a global slowdown and a credit crunch at home. There are speculations that authorities will be cutting interest rates in the coming months to provide fuel for the economic engine.

In fact, Premier Wen Jaibo revised an earlier growth prediction from 8% to 7.5% in March. This new information is a reversal from the first quarter of the year.

Challenges to Chile’s Production Outlook One third of the world’s copper supply is mined in Chile.

Keeping up with the production rate that it has sustained up until now is becoming difficult due to the country’s lack of infrastructure development. The high cost and availability of electricity has long been the single biggest challenge facing Chile’s mining industry, which threatens to thwart reaching its goal of bringing over seven million tons to market by 2020. Analysts estimate that the government will need to increase energy supply by 50% within the next eight years to keep up with power demands from both the domestic producers and the international mining giants. Blackouts are not uncommon and are expected to become more frequent as energy demand increases. The problem is that there is public opposition to building new power plants.

In coping with power outages, plus heavy rains, labor disputes, and environmental permitting issues, this South American nation faces constant difficulties in the process of extracting ore from the earth even though it possesses the richest deposits in the world.

Summary Near term prospects for copper prices remain steady or downward given the uncertain macro-economic backdrop, but when viewed with the enduring supply and demand fundamentals in place, many analysts and industry experts remain bullish for the medium and long term.

iQ12 IPD Commodity Reports

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PLASTICS

MALLEABLE IRON FITTINGS

This section included only in the 1Q and 3Q reports.

By now, everyone is likely aware of the 8% price increase that all the import manufacturers have implemented this spring.

Inventory at stateside depots is very strong, and competition between the stocking masters is getting fairly intense. Two import issues that may factor into additional increases later this year for the Chinese manufacturers are loss of government subsidies and a dumping review early in 2013 by the FTC. Like a number of other commodities, there is a question as to whether the Chinese Government will continue to subsidize this product. Also, to avoid the appearance of dumping, many believe another increase on the imports will likely happen yet this year, which will close the price gap with domestic. Time will tell on both.

VALVES This section included only in the 1Q and 3Q reports.

GROOVED PRODUCT Two developments have recently occurred. First, one of the major producers of grooved product has announced an 8% increase on all orders received after June 1, 2012. While at the time of this writing, the other manufacturers have not issued any announcements to the same, it is expected they may do so soon. The other significant development was the news release on April 5, 2012, that Tyco has acquired Shurjoint Products, which will be integrated into Tyco’s Fire Protection Products business unit.

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1Q12 IPD Commodity Reports

At the time of this writing, the domestic manufacturers have strong inventories, and they have not made any new price increase announcements, although there is speculation that 4-5% increase is possible this July-August.

Š 2012 American Supply Association. All Rights Reserved.