ASA MATERIALS MARKET DIGEST | 1 © 2012 American Supply Association. All Rights Reserved.

ASA MATERIALS MARKET DIGESTOctober, 2012 • Jim Olsztynski, Editor • Published monthly by the American Supply Association • www.asa.net • info@asa.net • 630.467.0000

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This report 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.

© 2012 American Supply Association. All Rights Reserved.

web: www.asa.netinfo@asa.net

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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 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 red-hot 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.

ASA MATERIALS MARKET DIGEST | 3 © 2012 American Supply Association. All Rights Reserved.

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.

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 weighted-average dumping margin for seamless refined copper pipe and tube sold in the U.S. from November 22, 2010, to April 30, 2011.

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

Annual & Year-To-Date Data from January-June 2012 2011 YTD 2011 YTD 2012 % Change YTD % Change 2007-11

Total Carbon and Alloy Pipe & Tube 9,898,742 5,555,406 7,808,597 40.6% 5.8%

Carbon Seamless Tubular Products (Other than OCTG) 1,965,444 1,102,725 1,425,017 29.2% 45.7%

Carbon Seamless OCTG 2,612,205 1,455,959 2,111,322 45.0% 58.9%

Welded Tubular Products (Other than OCTG) 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%

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

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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 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 convention, NetworkASA 2012: OWN IT, in Orlando, Florida. Nearly 90 wholesale-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.

ASA MATERIALS MARKET DIGEST | 5 © 2012 American Supply Association. All Rights Reserved.

Producer Price Index - Key Industry Products

Pipe, Valves & FittingsProduct

CodeJuly 2012 August 2012 % Change

% ChangeAugust 2011

Metal valves, except fluid power 1149-02 277.0 276.0 -0.4 4.7

Gates, globes, angles, and checks 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 and 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 1017-06 282.2 275.3 -2.4 -0.8

OCTG, standard, line pipe, carbon 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

Plumbing Fixtures, Fittings & Trim 1054-02 279.5 279.4 0.0 1.2

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

Enameled iron & metal sanitary ware 1056 201.1 201.8 0.3 1.0

Steam & Hot Water Equipment 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

Domestic water heaters 1066-01 337.9 338.3 0.1 4.7

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

Warehousing, Storage, & Related Services 32 97.1 97.7 0.6 -1.6

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