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An Overview Of Material Pricing Trends Once again this year, Lisa Reisman, executive editor of Metal Miner and an analyst for Azul Partners shares insights on industrial metal prices and trends. We’ll look at the factors driving the upturn in materials prices and those affecting the outlook for the future. We’ll look at hard data on commodities and individual metal trends. She’ll share some strategies you can use with your customers about your pricing strategies. But first, let’s tell you about Metal Miner.

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Some quick background on us … 10 different sites / brands / research services 8000+ visits per day 1,000+ subscribers (paid members) 99%+ of Fortune 500 visit monthly 125+ free and subscription articles published weekly across the network The only global procurement, supply chain and trade financing media and research platform A mix of expert contributing analysts and supporting editors and journalists

Stuart Burns David Gustin Tom Finn Richard Lee Irene Martinez Direct Procurement & Commodity Management (Europe/Asia) David Gustin Trade financing Tom Finn Healthcare Richard Lee Procurement M&A Katie Benchina Olsen Direct Procurement, Stainless Steel Markets Irene Martinez Forecasting

Our MetalMiner team Lisa Reisman Stuart Burns Taras Berezowsky Executive Editor Stuart Burns Co-Founder Editor Taras Berezowsky Operations Manager Fouad Egbaria Editor Katie Benchina-Olsen Senior Analyst Irene Martinez Forecast Analyst Arturo Rodriguez Quantitative Analyst Brianna Tonner Commercial Manager

What MetalMiner does Metal price forecasting (for our own lead gen and subscription) All-in-one nonferrous and ferrous monthly report Provides short-term tactical purchasing guidance Analysis conducted using both technical and fundamental analysis Long-term forecasting – used for budgets and planning Crowd sourced industrial metal price benchmarking! Form/alloy/grade/type data for 150+ of the most commonly used industrial metals (see me if you’d like to learn more!) Crowd-sourced price benchmarking; most comprehensive in the industry

The Recent Past And The Big Picture There are some very interesting and unusual things going on in the commodities and metals markets. In a rare turn, broad commodities are in a bearish market, while industrial metal prices are bullish. Usually commodities and the U.S. dollar move in inverse directions, but have been in tandem since January. Thomson Reuters/Jeffries CRB Index hit lowest point since last year in June. Meanwhile, the Powershares DB Base Metals Index is up more than 45% since January 2016. After strong gain in U.S. dollar from mid-2014 (when oil prices started to drop), it has fallen since January.

Broad commodity trends July ‘09 to July ’17 In April 2017, the MetalMiner team switched its outlook on commodities from bullish to bearish, calling a long-term downtrend. A bearish environment suggests taking a short-term buying strategy for commodities, as prices continue to drop. The CRB commodity index fell in June to its lowest levels in more than a year. The bull market that began in May 2016 appears to have run out of steam despite the rising industrial metals markets The Chinese economy appears to be struggling to curb credit growth and reduce financial risk. Chinese corporate debt has risen to a new high after years of stimulus growth, while the government seeks to find ways to “de-leverage” while maintaining growth. Despite a small improvement in last month’s China Caixin index, Chinese demand for most base metals shows weakness and uncertainty. The recovery of the U.S. dollar after the presidential elections in October 2016 caused the commodity bull market to weaken. Commodities and the U.S. dollar historically move in an inverse relationship. However, both have moved in tandem since the beginning of this year. One of them may show a trend reversal during this coming year. CRB Index is calculated using arithmetic average of commodity futures prices with monthly rebalancing. The index consists of 19 commodities: Aluminum, Cocoa, Coffee, Copper, Corn, Cotton, Crude Oil, Gold, Heating Oil, Lean Hogs, Live Cattle, Natural Gas, Nickel, Orange Juice, RBOB Gasoline, Silver, Soybeans, Sugar and Wheat. Note: A is April, O is October and J is July

Industrial metals trends July ’09 to July ‘17 Contrary to commodities, the long-term uptrend that started in 2016 has continued during 2017. In uptrending periods (i.e. bull markets), each specific base metal has a higher probability of increasing in price. Generally speaking, while an uptrend in base metals remains in place, metal buyers need to look for opportunities to buy forward. These opportunities are highlighted in our monthly outlook when they appear. During 2017 the uptrend has slowed down, showing signs of a brief pause which is called a side-ways trend. This uptrend is still in place but a the recent shift in commodity markets into bearish territory might suggest that industrial metals are forming a top in fact that’s where we were even late last week. The international steel industry is struggling with Chinese overcapacity. Even as capacity cuts have held in China, the Trump Administration announced an aluminum and steel probe under the Section 232 investigation. The investigation outcome has been postponed as of press time. One of the outcomes of the recent G20 summit involves measures the Chinese have taken on inspections of the quality of construction steel and machinery steel from July to September. These inspections aim to reduce the production of low-grade steel. Still there is some bullish news that traders are trading on Note: A is April, O is October and J is July

The USD Note: A is April, O is October and J is July The U.S. dollar and commodities have historically moved in different directions (i.e. an inverse relationship). Beginning in 2014, commodities became bearish while the U.S.dollar became bullish. This inverse relationship reversed in 2017, when commodities fell along with the U.S. dollar. Commodities hit bottom in 2016, while the U.S. dollar has peaked twice; once in 2016 (not a relevant peak) and another in 2017, after the presidential election. However, the rally of the U.S. dollar has fallen short of expectations. Despite recent short-term weakness in the dollar, we could see the currency gaining strength during the second-half of the year, and continue its long-term uptrend that started in the spring of 2011, time will tell. Note: A is April, O is October and J is July

What 3 things impact the long term forecast? The USD China Oil

Some Strange Days For Commodities & Metals Dollar and overall commodities have moved in tandem since January, contrary to usual patterns. Meanwhile, most of the key metals used in foodservice have moved higher as overall commodities moved lower. There are mixed messages from China. China GDP growth is slowing, purchasing trends for base metals have been mixed with recent surprise increase. The Chinese stock markets have been mostly higher. Meanwhile, oil prices continue to drag along under $50 bbl. Oil prices drive all commodities prices normally.

The USD Note: A is April, O is October and J is July The general dynamics of that inverse relationship between the U.S. dollar and the CRB index has changed this year, resulting in a downtrend for both commodities and the U.S. dollar. One of them may change their current trend. In the coming months, we will keep a very close eye on commodity markets and the U.S. dollar to see whether there is a trend reversal. The U.S. dollar continued to lose ground in June despite a rate hike. Since this rise was expected, the impact has been minimal, and has not created any upward pressure on the U.S.dollar, contrary to expectations. Most analysts expect another Fed interest rate hike at the end of the year. Note: A is April, O is October and J is July

Most Foodservice Metals See Higher Prices In April 2017, the MetalMiner team switched its outlook on commodities from bullish to bearish, calling a long-term downtrend. A bearish environment suggests taking a short-term buying strategy for commodities, as prices continue to drop. The CRB commodity index fell in June to its lowest levels in more than a year. The bull market that began in May 2016 appears to have run out of steam despite the rising industrial metals markets The Chinese economy appears to be struggling to curb credit growth and reduce financial risk. Chinese corporate debt has risen to a new high after years of stimulus growth, while the government seeks to find ways to “de-leverage” while maintaining growth. Despite a small improvement in last month’s China Caixin index, Chinese demand for most base metals shows weakness and uncertainty. The recovery of the U.S. dollar after the presidential elections in October 2016 caused the commodity bull market to weaken. Commodities and the U.S. dollar historically move in an inverse relationship. However, both have moved in tandem since the beginning of this year. One of them may show a trend reversal during this coming year. CRB Index is calculated using arithmetic average of commodity futures prices with monthly rebalancing. The index consists of 19 commodities: Aluminum, Cocoa, Coffee, Copper, Corn, Cotton, Crude Oil, Gold, Heating Oil, Lean Hogs, Live Cattle, Natural Gas, Nickel, Orange Juice, RBOB Gasoline, Silver, Soybeans, Sugar and Wheat.

China GDP China GDP growth has continued its slowdown which started in 2011. The government’s goal is to maintain current growth levels and not allow any further declines. This year’s GDP growth target is 6.5%, which so far has been achieved.

China PMI The Chinese PMI index has recovered since our last Annual Outlook Report and is currently above 50. The Caixin Manufacturing PMI Index measures the performance of the Chinese manufacturing sector. A reading above 50 indicates an expansion of the manufacturing sector compared to the previous month; below 50 represents a contraction; while 50 indicates no change. The Chinese PMI index peaked in December 2016, and has fallen sharply since February 2017. June’s higher-than-50 reading came as a surprise.

China stock market

Oil prices The current oil price is: $48.22 Oil prices have decreased since the beginning of 2017. As shown in the previous Annual Outlook report, oil prices above $50/barrel have supported metal prices. The current downtrend below the $60/barrel level and actually closer to $40 may have a depressing effect on metal prices. Lower oil prices mean lower transportation costs and decreasing production costs, especially for metals such as aluminum. From a technical perspective, oil prices will maintain their previous support and resistance levels in $40/barrel and $55/barrel, respectively. If prices broke resistance levels, some base metals prices, such as aluminum, would also likely increase.

Key Metals Recent Price Trends Lots going on with the key foodservice E&S metals. Aluminum prices are also being affected by both Trump administration’s infrastructure promises and trade issues. Copper price run-ups have been affected by strikes in several major mines, leading to possible supply shortages. Prices for raw steels are driven by both Chinese consumption and production. U.S. steel manufacturers claiming foul. After a bit of a pause after strong gains over past year, raw steel prices again on the rise. Stainless prices have been the outlier, running at about the same price as a year ago, as nickel prices lag. Trump administration threatening to put tariffs on steel and aluminum imports.

Aluminum MMI Price Trends In April 2017, the MetalMiner team switched its outlook on commodities from bullish to bearish, calling a long-term downtrend. A bearish environment suggests taking a short-term buying strategy for commodities, as prices continue to drop. The CRB commodity index fell in June to its lowest levels in more than a year. The bull market that began in May 2016 appears to have run out of steam despite the rising industrial metals markets The Chinese economy appears to be struggling to curb credit growth and reduce financial risk. Chinese corporate debt has risen to a new high after years of stimulus growth, while the government seeks to find ways to “de-leverage” while maintaining growth. Despite a small improvement in last month’s China Caixin index, Chinese demand for most base metals shows weakness and uncertainty. The recovery of the U.S. dollar after the presidential elections in October 2016 caused the commodity bull market to weaken. Commodities and the U.S. dollar historically move in an inverse relationship. However, both have moved in tandem since the beginning of this year. One of them may show a trend reversal during this coming year. CRB Index is calculated using arithmetic average of commodity futures prices with monthly rebalancing. The index consists of 19 commodities: Aluminum, Cocoa, Coffee, Copper, Corn, Cotton, Crude Oil, Gold, Heating Oil, Lean Hogs, Live Cattle, Natural Gas, Nickel, Orange Juice, RBOB Gasoline, Silver, Soybeans, Sugar and Wheat.

Copper MMI Price Trends In April 2017, the MetalMiner team switched its outlook on commodities from bullish to bearish, calling a long-term downtrend. A bearish environment suggests taking a short-term buying strategy for commodities, as prices continue to drop. The CRB commodity index fell in June to its lowest levels in more than a year. The bull market that began in May 2016 appears to have run out of steam despite the rising industrial metals markets The Chinese economy appears to be struggling to curb credit growth and reduce financial risk. Chinese corporate debt has risen to a new high after years of stimulus growth, while the government seeks to find ways to “de-leverage” while maintaining growth. Despite a small improvement in last month’s China Caixin index, Chinese demand for most base metals shows weakness and uncertainty. The recovery of the U.S. dollar after the presidential elections in October 2016 caused the commodity bull market to weaken. Commodities and the U.S. dollar historically move in an inverse relationship. However, both have moved in tandem since the beginning of this year. One of them may show a trend reversal during this coming year. CRB Index is calculated using arithmetic average of commodity futures prices with monthly rebalancing. The index consists of 19 commodities: Aluminum, Cocoa, Coffee, Copper, Corn, Cotton, Crude Oil, Gold, Heating Oil, Lean Hogs, Live Cattle, Natural Gas, Nickel, Orange Juice, RBOB Gasoline, Silver, Soybeans, Sugar and Wheat.

Raw Steel MMI Price Trends In April 2017, the MetalMiner team switched its outlook on commodities from bullish to bearish, calling a long-term downtrend. A bearish environment suggests taking a short-term buying strategy for commodities, as prices continue to drop. The CRB commodity index fell in June to its lowest levels in more than a year. The bull market that began in May 2016 appears to have run out of steam despite the rising industrial metals markets The Chinese economy appears to be struggling to curb credit growth and reduce financial risk. Chinese corporate debt has risen to a new high after years of stimulus growth, while the government seeks to find ways to “de-leverage” while maintaining growth. Despite a small improvement in last month’s China Caixin index, Chinese demand for most base metals shows weakness and uncertainty. The recovery of the U.S. dollar after the presidential elections in October 2016 caused the commodity bull market to weaken. Commodities and the U.S. dollar historically move in an inverse relationship. However, both have moved in tandem since the beginning of this year. One of them may show a trend reversal during this coming year. CRB Index is calculated using arithmetic average of commodity futures prices with monthly rebalancing. The index consists of 19 commodities: Aluminum, Cocoa, Coffee, Copper, Corn, Cotton, Crude Oil, Gold, Heating Oil, Lean Hogs, Live Cattle, Natural Gas, Nickel, Orange Juice, RBOB Gasoline, Silver, Soybeans, Sugar and Wheat.

Stainless MMI Price Trends In April 2017, the MetalMiner team switched its outlook on commodities from bullish to bearish, calling a long-term downtrend. A bearish environment suggests taking a short-term buying strategy for commodities, as prices continue to drop. The CRB commodity index fell in June to its lowest levels in more than a year. The bull market that began in May 2016 appears to have run out of steam despite the rising industrial metals markets The Chinese economy appears to be struggling to curb credit growth and reduce financial risk. Chinese corporate debt has risen to a new high after years of stimulus growth, while the government seeks to find ways to “de-leverage” while maintaining growth. Despite a small improvement in last month’s China Caixin index, Chinese demand for most base metals shows weakness and uncertainty. The recovery of the U.S. dollar after the presidential elections in October 2016 caused the commodity bull market to weaken. Commodities and the U.S. dollar historically move in an inverse relationship. However, both have moved in tandem since the beginning of this year. One of them may show a trend reversal during this coming year. CRB Index is calculated using arithmetic average of commodity futures prices with monthly rebalancing. The index consists of 19 commodities: Aluminum, Cocoa, Coffee, Copper, Corn, Cotton, Crude Oil, Gold, Heating Oil, Lean Hogs, Live Cattle, Natural Gas, Nickel, Orange Juice, RBOB Gasoline, Silver, Soybeans, Sugar and Wheat.

The 800 lb gorilla in the room Section 232 Lots of hysteria but we can expect a more rational recommendation Tariffs/quotas most likely scenario Lots of what-if’s… Year used to determine import volumes Materials carveouts Timelines Unlikely to have a big impact on prices long-term The delay works in favor of buying organizations

Customer and prospect pushback What you might hear… I’d like to peg my purchases to a price index… Can you hold my sales price fixed for a longer period of time? Possible Responses Price indexes are a two-edged sword…they never allow you to “beat” the market, they only ensure you “follow” the market When prices go up, you will pay more – with caps and collars, you might not We can always hold prices fixed for a longer period of time – we can add a “risk premium” to our quotation

Other sales strategies in today’s markets “Smart” customers are often “good” customers Use forecasts to show clients when it makes sense to “lock in orders” e.g. during rising cost markets Create caps and collars in customer quotations and agreements Share forecasts with your procurement peers See if you can provide longer term quotations at least to your best customers (using risk premiums – through your treasury and procurement functions) Be seen as adding value to your clients/prospects When asked “where do you get your market intelligence” by far and away “suppliers” are seen as a primary source of knowledge Have a story around how your company manages “risk” better than the competition and how that translates to a better service/product delivered to your clients…

So What Do You Do On Prices Next Year? As has been typical since the Great Recession, we have a sluggish market that restricts aggressive price increases. Still, the outlook from Metal Miner suggests that upward pressure on key metals continues. We had trouble finding details on plastics prices, but friends tell us they are also rising. We don’t have the AutoQuotes data this year, but we are almost certain list prices increases were aggressive in 2017. We think it’s another year to get what you can. Don’t be shy.

Contact details Lisa Reisman, CEO Azul Partners, Inc. Mobile: 773-865-0387 lreisman@metalminer.com John Conolly, CMO Mobile: 312-810-3317 jconolly@spendmatters.com