Platts

June 2012 Demand weak and prices falling or under pressure, but production continues above last year’s levels

The Eurozone crisis continues, with piece‐meal solutions in Greece and Ireland being followed by a bail‐ out for Spanish banks in early June. These actions do not appear likely to solve the problem permanently, while politicians and commentators around the world are citing weak economic growth in Europe as a concern for their own regions. Thus business confidence throughout Europe is still poor and is likely to remain so for some months, but China and US are increasingly affected. The euro has weakened sharply against the dollar after remaining at higher levels since the new year. This has recently cut the level of imports into Europe and is enabling exports from European producers to increase in some cases.

However, the economic situation in some other regions is better. In North America, economic data and leading indicators have been more positive, with unemployment falling, and there are still hopes that this election year will bring its usual good news for the US economy. This would fit with a boost in the second half of the year, but some sectors such as automotive and energy are already doing better than other steel‐using segments.

Economic growth in Asia is steady although the power‐houses of China and India are showing slower growth than predicted for steel demand. Demand has held up for Q2, but sentiment is still cautious and the third quarter is usually weaker. The Chinese economy has grown at a more modest rate in the first half, but an interest rate cut in early June and anticipation that government spending has been held back for the second half is giving some cause for optimism. Steel demand is less strong than a year ago, but output is slightly higher year‐on‐year. Some sectors, especially construction, still have some improvement to make. Drawdown of Chinese inventories has been slower than at this time last year, so stock levels are higher than preferred.

In US, flat products prices appear likely to continue slipping downwards as an attempt at increases by some producers was short‐lived. In Europe, spot flats prices could keep Con nued on Page 2 

Global Overview Pg 4

Coil Regional Review Pg 6

Long Product Review Pg 7

Plate Review Pg 8

Scrap Review Pg 8

Global Overview of Production Pg 9

The key question is will producers be driven to cut production levels if they are loss‐making between now and Au‐ gust or September, when the drop in actual demand over the summer may begin to be reversed.

WEAK DEMAND FOR FLATS IN US WILL LEAD TO STEADILY FALLING PRICES IN JUNE AND EARLY IN Q3, WHILE EUROPEAN PRIC‐ ES COULD ALSO SLIP UNLESS SUPPLY‐DEMAND BALANCE IMPROVES. COIL PRICES IN ASIA ARE LIKELY TO WEAKEN SLOWLY. LONG PRODUCTS’ PRICES ARE LIKELY TO DROP IN Q3 IN EUROPE AND US, IF SCRAP PRICING FALLS AND AFFECTS SENTIMENT. ASIAN LONGS LEVELS COULD ALSO SLIP. SCRAP PRICES ARE LIKELY TO CONTINUE TO FALL BEFORE FINDING A NEW, STABLE PRICE LEVEL FOR Q3.

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Steel Price Outlook Expectations in May (For Next 3 Months) 66% Decrease

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8% Increase

Asia & Middle East

12%

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Copyright © 2012 by Platts, The McGraw-Hill Companies, Inc.

Page 1

June 2012

slipping during the rest of Q2 and into Q3, though mills may cut back output to ensure it

matches real demand until after the summer shutdowns. Long products pricing in mature markets could continue to be stable provided production levels match the lukewarm demand, but weakening scrap levels may drag prices down.

Asian prices may follow the weaker levels in other regions in what is a traditionally‐slower quarter, but Chinese pricing may remain more stable, if second‐half demand increases and stock‐levels are drawn down as production slows.

The Middle East markets for long products will be quiet for the next few months in the height of summer and with Ramadan approaching. This will affect exporters from Turkey, putting pressure on price levels, and may have an impact on scrap demand and pricing. Export prices for CIS products, both flat and long, have slipped after recent firmness, but demand has improved strongly in their domestic markets.

Scrap prices began falling during May except in USA where they remained surprisingly stable.

Prices usually drop during Q2 and Q3 as better weather leads to higher collection, but international demand in Turkey, India and Asia which had been keeping export levels firm, may now fall leaving US and Europe over‐supplied. Iron ore prices fell steadily during most of May as Chinese buyers have been slow to return to the market to restock. Ore price levels are likely to remain stable in the next few months if Chinese steel production remains at current rates, though buyers may compare pricing with movements in the scrap market.

Looking ahead to the fourth quarter of 2012, producers in US and Europe will be trying to push prices upwards if there is the anticipated rise in demand after the summer slowdowns.

In Asia, producers should be able to secure price rises from a firmer base level during Q3, as offtake should improve and production levels are likely to have been brought back into line with demand.

The likely scenarios for the next three months are:

• US flats spot prices are likely to continue to weaken slightly but may find a bottom‐ level during Q3 and producers could attempt price increases by the end of the quarter. Real demand is likely to be fair if the general economy improves but, unless production is cut, the market could be weaker.

• Northern European coil spot prices are likely to slip during June, as destocking ahead of the summer shutdowns continues but import levels will now fall. Several mills have announced small increases in early June, which may be difficult to achieve until later in Q3.

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“The Middle East markets for long products will be quiet for the next few months in the height of summer and with Ramadan approaching.

This will affect exporters from Turkey, pu ng pressure on price levels”

“In Asia, producers should be able to secure price rises from a firmer base level during Q3, as o ake should improve and produc on levels are likely to have been brought back into line with demand”

Copyright © 2012 by Platts, The McGraw-Hill Companies, Inc.

Page 2

June 2012

Output levels have decreased slightly in April and there will be some slowdowns in July and August. If there are further production cuts in May and June, prices could remain more stable as output matches actual demand.

• Southern European flat products prices could continue slipping during June after falling in May, but lower production levels could be more in line with the poor demand.

Spanish mills will cut output in July and Italian producers in August, so over‐supply may be reduced. Prices are often stable during early Q3 as there are limited new transactions.

• Prices of coils into Asia have fallen steadily during May. Sentiment has been weakening in line with other regions, and demand normally eases during Q3. Prices are likely to decrease slightly in the third quarter, especially if raw materials prices are weaker.

• Domestic Chinese flats pricing has been steady during Q2, and demand is expected to remain fair after improving from end‐2011’s poor levels. However, output has been very strong so far this year, and stock levels are higher than in 2011. If there is an H2 stimulus, prices could increase later in the year.

• Long products’ pricing could fall in Europe and US during June, after recent weakness, even if construction season demand is fair. Falling scrap prices could have a downwards effect on sentiment and pricing. Prices in Asia have fallen slightly, in line with billet and scrap levels, and are likely to weaken going into Q3.

• The spot market for 63% iron ore fell further in early June after stabilising in late May, with prices finishing the month at US$ 135‐136/dmt. Prices should become firmer again when Chinese buyers need to restock. Indian problems of availability and shipping during the monsoon will be less significant this year.

Iron ore quarterly contract costs for Q2‐to‐date, April to June, have fallen slightly from • Q1 levels but are still well above spot market levels. Two new exchanges or market places began operation in May, which could also closely reflect the spot market.

• Scrap prices began falling during May in most markets outside US as collection rates rose while demand fell. This export demand had been strong but could now fall further, and all prices fell sharply in early June. European domestic levels also weakened during May and prices could be more stable in Euro terms even while falling in US dollars. Asian and Turkish mills’ scrap demand may ease over the next few months, if steel demand slackens, which should keep prices weak and mean any excess material remains in Europe and North America.

• Spot coking coal prices stabilised and rose briefly during May, as strikes and shipping problems in Australia continued. Any increase in demand in the fourth quarter, after a quiet Q3, could push prices upwards again.

WSA figures show that global output fell by 3.7 million tonnes (m t) in April compared with March’s figure of 132.2m t. Daily production rose 0.5% as April is a shorter month. Chinese monthly production was down slightly to 60.6m t, but this was a 1.6% increase in daily rate from March’s output and the four‐month total shows a rise of 1.9% from last year’s output.

South Korean production for April was also higher on a daily basis.

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“Spanish mills will cut output in July and Italian producers in August, so over‐supply may be reduced. Prices are o en stable during early Q3 as there are limited new transac ons”

“Two new exchanges or market places began opera on in May, which could also closely reflect the spot market”

“WSA figures show that global output fell by 3.7 million tonnes (m t) in April compared with March’s figure of 132.2m t. Daily produc on rose 0.5% as April is a shorter month”

Copyright © 2012 by Platts, The McGraw-Hill Companies, Inc.

Page 3

June 2012

Most regions showed a small increase in daily output, though actual EU‐27 production fell by 5.4%. Daily production fell in Turkey and Russia, but increased in South America. North America and other Asian countries maintained their output levels. The growth in global production so far in 2012 is 0.7% above 2011, and the year‐to‐date total is 504 million tonnes.

GLOBAL OVERVIEW

US flats spot prices moved steadily downwards during May a er another US$ 30/st announced increase failed to halt the slide in prices. Transac on levels will con nue to move downwards during June. Stockholder demand con nues to be for replacement or real demand as destocking is likely to con nue un l HR Coil US$/t a er the summer slowdowns. End‐ user o ake may then improve at the end of the third quarter, if the general economic situa on con nues to grow. In Europe, prices have fallen during May, but several producers have announced a small price increase to try to push levels back upwards for June. O ake is s ll fair in Asia, but flats and longs prices have both moved steadily downwards during May. Sen ment is s ll cau ous, and Q3 is typically a slower quarter for most buyers.

Domes c China demand for flats has been steady during May, and strong output has kept prices stable but under pressure. Inventories have not been drawn down as Graph 1 quickly as at the start of Q2 last year. Long products consump on is also not as strong as would be expected for Q2, but prices rose sharply at the start of May before falling back again. Chinese export prices have fallen to match regional market levels.

In US, prices for coil products fell during May and prices were under further pressure at the start of June. Produc on levels remained high in April, and seem likely to have con nued during May, though the closure of RG Steel may show up later. Plate prices weakened again, though less sharply than coils so far, while rebar producers kept prices steady for most of the month before European Coil Euro/t Ex-works reducing levels at the end of May as the scrap pricing mechanism dropped.

Prices for flat steel products in European markets fell slightly during May. Some European producers have announced a small price increase due to higher costs, but poor apparent demand may mean this will be difficult to achieve. Stockholders are likely to continue to de‐stock until late in Q3.

Production levels have been cut slightly in April, and the weakening currency and lower price levels are likely to mean that import material arrivals will decrease for the near future.

“Stockholder demand con nues to be for replacement or real demand as destocking is likely to con nue un l a er the summer slowdowns”

“Long products consump on is also not as strong as would be expected for Q2, but prices rose sharply at the start of May before falling back again”

“Some European producers have announced a small price increase due to higher costs, but poor apparent demand may mean this will be difficult to achieve”

Graph 2

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Copyright © 2012 by Platts, The McGraw-Hill Companies, Inc.

Page 4

June 2012

Prices for HR coil in Asia decreased, and CR and HDGalvanised coil prices also slipped by similar amounts during May. They are all expected to drop further as offtake is likely to ease during Q3, after a disappointing Q2. Flat products prices in China decreased at the start of the month but then rose slightly due to steady demand. Some mills have announced unchanged list prices for June, which may help to support the spot market.

Export prices for flat products from China decreased slightly during May and remain competitive in regional markets.

Long products demand has remained fair so far in Q2 after the firmer first quarter in the mature economies of Europe and US, due to the mild weather. Production appears to have matched demand so prices have been under less pressure, but lower scrap prices may change that. Prices in Europe have eased during May, and could be stable at best in June as falling scrap prices affect sentiment. Rebar producers in US reduced prices at the end of May based on the scrap‐pricing mechanism, and may have to reduce prices again during June. However, producers will raise base prices so the fall will be less than the scrap mechanism would suggest.

Merchant bar and wire rod prices also fell in Europe during May, and could be under further pressure in the next few months unless end‐user demand holds up despite the holiday period.

Prices for H Beams, medium and heavy sections have been slightly weaker in Europe and Asia, though US producers held US WF Beams transaction prices steady. However, all beam prices are likely to weaken slightly in June.

In US, wire rod producers saw their prices slip during May, as lower scrap prices and rising imports took effect, and are likely to see further falls in June. Merchant bar prices in US were slightly Rebar $/t lower during May, and could slip further in June.

Billet prices in South East Asia fell sharply lower during May and could move further downwards in June as prices of export material from Turkey and CIS weaken as demand falls in other export markets, especially in the Middle East due to summer and Ramadan.

Imported prices of most finished long products into SE Asia were slightly weaker during May, and may slip further in June as demand falls as usual during the third quarter. Rebar, wire rods and merchant bar prices all decreased slightly during May. Graph 3 Domestic prices for all long products in China rose initially during May despite stable demand as activity outside the social housing programme remained lacklustre.

Scrap prices remained steady in US during May, despite falling markets elsewhere, as good collection rates were offset by strong domestic and export demand. However, import prices into Turkey and Asia began to fall in mid‐May and this has continued into early June.

Prices have fallen even more sharply in US in early June, so the decreases are now equivalent. Prices in Europe could drop further in June if export demand remains weak while collection rates increase, though the effect may be smaller in Euro terms. Prices for imported scrap into Asia could fall further even if demand is steady, while offtake drops in other regions.

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“Produc on appears to have matched demand so prices have been under less pressure, but lower scrap prices may change that”

“In US, wire rod producers saw their prices slip during May, as lower scrap prices and rising imports took effect, and are likely to see further falls in June”

“import prices into Turkey and Asia began to fall in mid‐May and this has con nued into early June.

Prices have fallen even more sharply in US in early June, so the decreases are now equivalent”

Copyright © 2012 by Platts, The McGraw-Hill Companies, Inc.

Page 5

June 2012

COIL REGIONAL REVIEW

Flat products spot prices in US dropped sharply during May, as a brief attempt to stabilise levels by announcing a US$ 30/short ton increase failed. Buyers are only making necessary purchases as they anticipate lower prices ahead, especially while future supply levels appear likely to be plentiful. Flats prices moved lower in northern Europe, especially for HR coil, as buyers waited for Q3 announcements while noting that demand was showing weakness from early May onwards. Levels in southern Europe finished the month slightly lower as prices had fallen earlier, even though market sentiment remained poor. Prices in Asia also fell during May, as buyers took a cautious view on a quarter that has not been as strong as usual.

HR Coil prices in US fell on a weekly basis totalling US$ 35/st to US$ 635‐645/st (US$ 700‐ 711/t) at the end of May. Prices are likely to continue to fall in June unless the producers can convince the market that the bottom has been reached. CR coil prices also dropped by US$ 40/st, ending May at US$ 735‐755/st (US$ 810‐832/t). HD Galvanised coil was also US$ 35/st lower at US$ 795‐805/st (US$ 877‐888/t), though the steady automotive sector should soon give these prices some support. Import volumes for most products have increased sharply, as bookings were made when earlier price levels were more attractive, but these could begin to slow soon. Mill production rates continued at high levels during April, and there are no signs of any slowdown in output in May, though June may show some decreases.

Flat products producers in northern Europe have seen spot levels move steadily downwards during May, and may slip further. The weakness continued into early June, but several producers announced small increases and it remains to be seen whether buyers will accept these new levels. It is likely that prices will hold steadier with few transactions as actual demand is likely to be poor until September. If destocking has been successful ahead of the summer shutdowns, apparent demand may improve. Daily production fell in April and this may be continued in the rest of Q2.

In northern Europe, HR Coils prices fell to Eur 500‐525/t (US$ 625‐656/t), while CR Coils also decreased more slowly to Eur 590‐615/t (US$ 737‐768/t). HD Galvanised base prices dropped to Eur 580‐610/t (US$ 724‐762/t), but there may be more strength in CR and HDGalvanised coil prices in Q3.

Southern European coil prices slipped slightly during May, having been more stable since February and not achieved the higher levels as in the north. Demand remains at low levels, especially for a second quarter, and destocking is already taking place. Some production is being cut, and Spain will have the earliest holidays in July.

HRC $/t There is also no sign of any end‐user offtake improvement before the summer slowdowns. HR Coil prices are now at Eur 510‐520/t (US$ 637‐ 649/t) and these prices are likely to slip further in June, though falling import volumes could help price levels. Prices for CR Coil were slightly lower at Eur 580‐610/t (US$ 724‐762/ t) while HDGalvanised coil base price was also down to Eur 560‐600/t (US$ 699‐749/t).

South East Asian HR coil prices moved lower during May to US$ 635‐660/t cfr, and they may drop slightly during June if demand eases and supply continues at high levels. Latest Chinese Graph 4

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Coil Price Outlook Products (HRC)

May

Jun*

Brazil dom. Del. BRL/t

1970-2030 2049-2110

China dom. Shanghai RMB/t

4090-4270 4150-4160

China export FOB $/t

620-625

605-615

E. Asia import CFR $/t

635-665

620-650

Eur import CIF S.Eur pt €/t

500-550

500-530

60-60

60-60

Middle East imp CFR $/t

660-720

600-650

N.America dom FOB $/s.ton

635-680

625-645

N.Euro dom Ex-Works €/t

500-545

500-535

Rus Blk Sea export FOB $/t

580-620

565-585

S.Euro dom Ex-Works €/t

510-525

495-525

Ukr Blk Sea export FOB $/t

560-605

560-565

May

Jun*

Jap dom FOT ¥/kg

Products (CRC) Brazil dom. Del. BRL/t

2560-2570 2682-2700

China dom. Shanghai RMB/t

4730-4930 4700-4800

China export FOB $/t

675-680

675-680

E. Asia import CFR $/t

700-750

690-740

Eur import CIF S.Eur pt €/t

575-595

570-590

N.America dom FOB $/s.ton

735-795

725-755

N.Euro dom Ex-Works €/t

590-630

580-615

Rus Blk Sea export FOB $/t

680-740

650-690

S.Euro dom Ex-Works €/t

580-610

570-600

Ukr Blk Sea export FOB $/t

670-680

670-680

May

Jun*

Products (HDG) China dom. Shanghai RMB/t

4920-5000 4920-5000

China export FOB $/t

700-710

700-710

E. Asia import CFR $/t

760-810

750-800

Eur import CIF S.Eur pt €/t

580-600

570-590

Mid E. import CFR $/t

800-900

790-840

N.America dom FOB $/s.ton

795-840

785-805

N.Europe dom Ex-Works €/t

580-630

570-600

S.Europe dom Ex-Works €/t

560-620

550-590

*Prices listed are SBB forecasts

Copyright © 2012 by Platts, The McGraw-Hill Companies, Inc.

Page 6

June 2012

export prices for HR coil have also fallen to US$ 620‐625/t fob, which followed the SE Asian market levels downwards, but sales have been more difficult to achieve recently. CR coil and HD Galvanised prices in SE Asia both fell US$ 10/t during May to US$ 700‐750/t and US$ 760‐810/t cfr, and they are likely to decrease slightly in June.

LONG PRODUCTS REGIONAL REVIEW

Rebar prices moved lower during May in all the key regions. Prices in Asia moved downwards by US$ 30/tonne and were steady for most of the month in US before dropping sharply at the end of May driven by lower scrap pricing. Rebar prices in Europe also fell by Eur 10/t during May. Construction industry activity should remain steady, at what should be the height of the season, and prices will be nearly stable if production continues to be well‐matched to real demand in the mature markets. European prices for merchant bar were sharply lower in May, and are likely to be weaker during June. In Asia, H Beam, merchant bar and wire rods price levels were slightly lower in May, and are also likely to weaken.

Medium and heavy sections prices in Europe declined during May, with prices down to Eur 590‐620/t (US$ 737‐774/t), and levels are expected to weaken further in June. SE Asian H‐ Beam price levels rose early in May but then slipped back to US$ 810‐820/t cfr. Prices of WF Beams in US were unchanged at US$ 790‐820/st (US$ 871‐904/t) Wire Rod $/t during May, but prices will be under pressure from falling scrap levels during June.

Wire rod pricing in US slipped in May to US$ 740‐760/st (US$ 816‐838/t) as scrap prices fell and rising imports helped to push pricing lower. Rebar prices in US were steady for most of the month before falling to US$ 695‐ 715/st (US$ 756‐789/t) at the end of May. Mills will be aiming to offset some of the imminent scrap price decreases by increasing base prices, as demand should con nue to be fair.

Rebar prices in Europe fell back slightly Graph 5 during May and finished at Eur 520‐ 540/t (US$ 649‐674/t), and could slip in June if scrap levels fall further. Wire rod prices slipped slightly during May to Eur 520‐540/t (US$ 649‐674/t), and may struggle to remain stable as end‐user demand eases during the summer.

Rebar prices in SE Asia ended the month US$ 30/t lower at US$ 610‐650/t cfr. Import price levels for merchant bars decreased by US$ 10/t to US$ 770‐790/t cfr. Imported wire rod prices into SE Asia were also slightly lower at US$ 650‐660/t cfr, and are likely to slip further in June.

Billet prices continued their decline from the end of March and fell US$ 30/t during May in SE Asia, and finished the month at US$ 630‐650/t cfr. Export prices for CIS and Turkish material have also fallen steadily during May once the US$ 600/t fob level had been breached on the downside, finishing at US$ 565‐585/t fob. CIS billet producers will try to return prices upwards if Asian demand is fair, but there are fewer buyers in other regions competing for this material, especially as Ramadan approaches and reduces demand in the Middle East.

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Longs Price Outlook Products (Debar/Rebar)

May

Jun*

Turkey export FOB $/t

640-670

620-650

Blk sea export FOB $/t

620-660

615-630

E. Asia import CFR $/t

610-680

610-640

3940-4140

3910-3930

Eur dom del €/t

520-545

515-540

Eur import CIF S.Eur pt €/t

510-520

490-510

China dom. Shanghai RMB/t

55-55

55-55

Mid E. import CFR $/t

670-680

670-675

N.America dom FOB $/s.ton

695-725

695-715

Products (Beams /Sections)

May

Jun*

E Asia import CFR $/t

820-830

810-820

Eur dom del €/t

590-640

580-620

Jap dom FOT ¥/kg

Jap dom FOT ¥/kg N.America dom FOB $/s.ton Products (Merchant Bar)

73-73

73-73

790-820

790-820

May

Jun*

4300-4300

4190-4200

E Asia import CFR $/t

770-790

770-790

Eur dom del €/t

550-620

540-580

N.America dom FOB $/s.ton

890-920

890-920

China dom. Shanghai RMB/t

Products (Wire Rod) Blk sea export FOB $/t

May

Jun*

630-670

630-650

4220-4230

4000-4010

E Asia import CFR $/t

650-660

640-660

Eur dom del €/t

520-540

515-540

Eur import CIF S.Eur pt €/t

530-540

520-530

N.America dom FOB $/s.ton

740-780

740-760

China dom. Shanghai RMB/t

*Prices listed are SBB forecasts

Copyright © 2012 by Platts, The McGraw-Hill Companies, Inc.

Page 7

June 2012

COMMODITY PLATE REVIEW

Plate prices fell in all regions during May. Prices dropped slightly in northern and southern Europe in Euro terms during May, and decreased steadily in Asia. Prices fell more heavily in US but may hold steady at this lower level. Chinese export prices have also eased slightly in line with lower Asian market levels, and prices are expected to drop Plate $/t further in June.

Plate prices decreased continually in northern Europe by Eur 30/t and transaction prices are in the range Eur 580‐600/t (US$ 724‐749/t), and they could slip further in June. Stockists’ inventories are reported to be back to normal levels, which is higher than intended ahead of the summer shutdowns, but end‐user demand could be fair during the third quarter.

Hence prices are likely to be weak even if output matches actual demand.

Southern European commodity plate producers also saw spot price levels drop by Eur 30/t during May, due to Graph 6 weak demand in the key markets of Italy and Spain. Current levels are at Eur 550‐570/t (US$ 687‐712/t), and these may slip further in the next few months although exports could increase.

In USA, commodity plate prices have been under pressure since the start of May, as demand appeared to drop. This was due to concerns about high production rates and the level of imports, which have been rising. Inventory levels appear to be slightly higher than normal, but firm end‐user demand has not absorbed current production levels. Prices fell back by US$ 40/ st and were at US$ 880‐900/st (US$ 970‐992/t) at the end of May, and may now have reached a plateau for Q3.

In SE Asia, prices for commodity plate dropped to US$ 640‐660/t cfr, and are expected to decrease further in June as demand is unlikely to improve. Export prices of Chinese material have also fallen sharply by US$ 35/t to US$ 610‐620/t fob, so as to remain competitive in the Asian region.

SCRAP AND RAW MATERIALS REVIEW

Scrap prices have been falling in most regions during the second half of May except North America, where prices remained fairly stable. However, prices are falling sharply in US at the start of June, and continuing to drop elsewhere. The normal improved availability, due to the better weather in both Europe and North America, had been absorbed by steady export demand and prices. Later in May, export demand began to slow and prices began falling steadily. Lower US export prices due to the reduced import demand from Turkey and Asia will continue to drag domestic prices downwards. Ramadan and slower summer activity will restrict Turkish demand for the next few months.

Northern European scrap price levels in euros slipped during May, which meant an even sharper decrease in dollar terms. Scrap prices in southern Europe increased slightly early in May, taking them above levels in the north, but then dropped more sharply at the start of June. Price levels in SE Asia dropped steadily during May, and are likely to continue to be weak in June as demand from importers falls.

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Plate Price Outlook May

Jun*

4150-4200

4040-4070

CIS export FOB $/t

620-680

n/a

N.Europe dom Ex‐Works €/t

580-630

570-600

S.Europe dom Ex‐Works €/t

550-600

545-570

Eur import CIF S.Eur pt €/t

535-560

535-555

E. Asia import CFR $/t

640-660

640-660

N.America dom FOB $/s.ton

880-900

880-900

China export FOB $/t

610-620

610-620

Products China dom. Shanghai RMB/t

*Prices listed are SBB forecasts

“The normal improved availability, due to the be er weather in both Europe and North America, had been absorbed by steady export demand and prices”

“Price levels in SE Asia dropped steadily during May, and are likely to con nue to be weak in June as demand from importers falls”

Copyright © 2012 by Platts, The McGraw-Hill Companies, Inc.

Page 8

June 2012

Domestic scrap prices in US for No 1 Bundles and Bushelling were slightly weaker during May at US$ 440‐445/lt, after falling US$ 5/lt from April’s levels.

Shredded scrap was also lower during May at US$ 420‐425/lt, after losing US$ 15/lt since March. Both prices fell US$ 45‐65/lt in early June.

In northern Europe, shredded scrap prices fell Eur 5‐10/t from April’s levels and finished May at Eur 305‐320/t (US$ 381‐ 400/t). Prices in southern Europe rose slightly before easing to Eur 320‐340/t (US$ 400‐425/t). Export prices of shredded scrap from Europe increased by US$ 5/t to US$ 410‐415/t fob before dropping in the Graph 7 second half of the month, and may continue to drop further later in June after falling sharply at the start of the month as overseas pricing continues to weaken.

Scrap prices in Asia also fell steadily during Raw Materials US$/mt May to US$ 440‐445/t cfr for HMS 1/2, and prices have continued to drop in early June.

Spot iron ore prices fell steadily during most of May, losing US$ 12/dmt as Chinese buyers still remained out of the market despite appearing to need to restock.

Prices have dropped back again in early June but may then move higher if more Chinese mills come back to restock while their steel output continues to run faster than last year. Indian supply offers will be fewer as the monsoon takes effect, though demand for these products has declined.

More miners and customers in China are agreeing current‐quarter, current‐month or Graph 8 weekly pricing periods which should closely follow the spot market. For May, spot prices finished below the current‐quarter‐to‐date’s level and the monthly average, and this situation may put pressure on the system unless prices keep firming.

The spot market for Indian origin material 63% Fe iron ore fell during May, starting at US$ 147 ‐153/dmt and dropping to US$ 135‐136/dmt cfr.

Coking coal contract prices for the next quarter have firmed slightly, as spot prices have rebounded upwards to US$ 215‐225/t fob Australia at the end of May. A strike and bad weather have recently affected East coast Australian operations, and spot prices are likely to continue to be firmer in the short‐term. However, any decline in demand in Q3 could mean that this price rise is reversed for the next quarter.

GLOBAL OVERVIEW OF PRODUCTION

The monthly production figures from WSA show that April’s global production was 3.6 million tonnes less than in March. April is a shorter month, so its actual tonnage calculates to a 0.5% increase in daily output rate compared with March. The monthly output was 1.2% higher than April 2011. World monthly production in April was 128.4 million tonnes, which

Scrap US$/t

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“Export prices of shredded scrap from Europe increased by US$ 5/t to US$ 410‐415/t fob before dropping in the second half of the month, and may con nue to drop further”

“Prices have dropped back again in early June but may then move higher if more Chinese mills come back to restock while their steel output con nues to run faster than last year”

“World monthly produc on in April was 128.4 million tonnes, which means that the four‐month global output total is 504 million tonnes, 0.7% above 2011’s level”

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June 2012

means that the four‐month global output total is 504 million tonnes, 0.7% above 2011’s level.

European actual production fell sharply month‐on‐month by 5.4% ‐ 2.2% lower on a daily basis ‐ while total Asian output decreased by 1.6 million tonnes. Most other regions showed steady daily output, but Crude Steel Output (thousand tonnes) production was slower in Turkey and Russia.

Feb 2012 Mar 2012 Apr 2012

EU27 output of 14.9 million 26,110 28,445 26,995 Europe tonnes in April was 850,000 14,142 15,736 14,884 - EU 27 tonnes lower than in March.

There were sharp declines in 2,904 3,344 3,111 - Other Europe output in France, Germany, Italy and Spain.

9,064 9,365 9,000 - CIS

10,191 10,781 10,425 N America In Other Europe, Turkey’s monthly output fell sharply 7,544 7,961 7,705 - USA to 2.9 million tonnes, a fall of nearly 8% from March. The 3,856 4,250 4,129 S America total CIS output was 3.9% lower than in March, with 1,202* 1,299* 1,260* Africa Russian production falling 1,661* 1,625* 1,559* Middle East 4.4% and Ukraine maintaining unchanged daily 77,353 85,059 83,459 Asia production levels.

55,883 61,581 60,575 - China US output was 7.7 million 548 575 550 Oceania tonnes in April, which was 3.2% lower than March’s 120,922* 132,033* 128,376* World Total revised figure.

South Source: WSA * 3 countries’ data re‐instated American output was 0.12 million tonnes below March’s level at 4.1 million tonnes, a 0.4% increase in the daily rate. Brazilian production was 2.7% lower at 3 million tonnes.

China’s monthly output of 60.6 million tonnes was 1.6% lower than March’s figure. April’s production is an increase of 2.6% on April 2011’s output. India’s monthly production was estimated as 3.2% lower at 6 million tonnes. Japan’s output was 2.7% below March’s level, and South Korea’s production was 1.4% lower compared to the previous month at 6 million tonnes. Taiwan’s estimated production fell by 3% to 1.8 million tonnes. Their combined total output is around 16.9 million tonnes, which is a 4.3% increase from the joint monthly production level achieved in April 2011.

The Asian countries’ total production of 83.5 million tonnes was an increase of 3% from April 2011. This region accounted for 65% of global production in April, consistent with figures for recent months.

World output excluding China was 67.8 million tonnes in April. World output excluding China for the four months to date is 270 million tonnes, compared to 270.6 million tonnes in 2011, a decrease of 0.2%.

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