1. Global Scrap and Copper Market Updates Joseph C. Pickard Chief Economist and Director of Commodities Institute of Scrap Recycling Industries, Inc. CARI 75 th Annual Convention June 11, 2016 Ottawa, Canada

2. The Last Decade in Global Scrap Trade Flows *Exports from all UN reporting countries of scrap plastic, rubber, paper and fiber, glass, textiles, precious metals, base metals and ferrous metals. 2006-2015 volume: 1.9 billion metric tons

3. Peak Global Scrap Trade Flows: 2011

4. China Producing Too Much of Everything and Exporting Deflation Producer prices for industrial goods in China have been falling for nearly 4 years due in part to the correction in the Chinese property market.

5. Chinese Steep Output and Ferrous Scrap Use

6. Chinese Ferrous Scrap Imports from All Origins

7. U.S. Imports and Exports of Ferrous Scrap

8. Canadian Ferrous Scrap Imports

9. Keeping China in Perspective

10. Steady Overseas Demand Underpinned Recovered Paper Prices Trade data from the Census Bureau show U.S. exports of recovered paper and fiber were up around 2% by volume in 2015 to approach 21.6 million short tons, the highest volume of loadings since 2012. China was again the largest overseas customer by far last year, accounting for 14.9 million short tons, or nearly 70% of total U.S. recovered paper and fiber exports.

11. 2015 in Review – Scrap Industry Challenges Excess global production across a range of commodity markets, e.g. crude oil, iron ore, etc., weighs on prices as investors turn even more bearish on commodities. China contributing to global deflationary pressure. Weaker overseas scrap demand amid falling primary prices, slowdown in Chinese economic and manufacturing growth and substitution to ore and refined. Uneven global and U.S. manufacturing output across various industries and geographic regions. Disconnect between mostly positive macroeconomic indicators and difficult scrap market conditions widens. Falling commodity prices + soft manufacturing output + strong dollar + logistical & regulatory issues = Margins disappear, scrap industry consolidation.

12. Signs of Life in 2016: Ferrous Scrap Prices

13. 2016 Year-to-Date Nonferrous Prices

14. Copper Scrap Prices For the first two months of 2016, the International Copper Study Group is estimating global refined copper production exceeded demand by 76,000 tons. Taking into consideration Chinese bonded warehouse stock changes, the Study Group estimates the supply surplus expanded to 140,000 tons amid an influx of copper imports. Official Chinese trade data indicate China’s refined copper imports rose 3.6 percent year-on-year in April to 341,000 metric tons. And while the LME official 3- mo. copper asking price has dipped from more than $5,000 per ton in late April to below $4,600 per ton this week.

15. U.S. Copper Market Developments: Copper Consumption and Copper Scrap Recovery According to U.S. Geological Survey estimates, reported consumption of refined copper in the U.S. increased 2.9% in 2015 to 1.8 million metric tons while recovery of old + new copper scrap edged up 1.2% to around 830,000 metric tons.

16. U.S. Copper Scrap Consumption by Industry Segment USGS reports that refined copper and copper scrap were used at about 30 brass mills, 14 rod mills, and 500 foundries and miscellaneous consumers in the United States last year.

17. U.S. Copper Scrap Exports

18. U.S. Copper Scrap Export Gains and Losses

19. Year-to-Date U.S. Nonferrous Scrap Exports According to trade data from the Census Bureau, combined U.S. exports of the major nonferrous scrap metals declined around 3 percent year-on-year by volume in the first quarter of 2016, although overseas scrap demand varied considerably by metal. The Census Bureau data show U.S. exports of copper and copper alloy scrap during first quarter of 2016 increased 2 percent by volume to more than 210,000 metric tons as improved demand from Canada, India and the Benelux countries outweighed flat demand from mainland China.

20. Year-to-Date U.S.-Canada Copper Scrap Flows

21. Copper Market Developments LME stocks have surged by more than 50,000 tons or more than 30 percent since the start of June to 210,000 tons, principally caused by large shipments out of China due to the absence of LME-SHFE arbitrage opportunities. While LME inventories remain down for the year, net inflows could continue as long as the arbitrage window remains unattractive and Chinese demand remains sluggish. But the Chinese market seems to have tightened, hence the steep fall in visible inventories in recent weeks. SHFE stocks have fallen more than 200,000 tons or 54 percent since mid-March, which should prevent Chinese smelters from shipping their metal to the LME system in major volumes. China announced in May a three-year spending plan of 4.7 trillion yuan on transport infrastructure, including railways, roads, and airports. This should boost copper demand and support prices in the medium term. The International Copper Study Group is forecasting a 56,000 metric ton global refined copper deficit in 2016. Source: Fastmarkets/ICSG

22. Goldman Sachs Outlook “With prices rising significantly, and with the structural case for base metals remaining very poor we recommend producers and investors with longer- term horizons begin implementing hedging strategies and consider short positions in copper and aluminium over the coming month,” Goldman Sachs analysts wrote in a recent report. “In Goldman’s 12-month view, copper may drop to $4,000 a ton and aluminum will probably slide to $1,350. Deleveraging in China and emerging markets, further dollar strength, mining cost deflation and strong supply growth, particularly in copper because of a prior boom in capital expenditure, are set to keep “capex-heavy” metals prices under pressure over the coming year, the bank said. “Overall we find that the likelihood of a sustained improvement in Chinese demand during 2016/17 is low,” Goldman said.” Source: Bloomberg

23. Global Growth Forecasts for 2016: Developing Economies Still Driving Growth Source: International Monetary Fund World Economic Outlook (April 2016).

24. Commodities Outlook Few expecting a V-shaped recovery at start of 2016, but soft prices have impacts for supply (e.g. obsolete scrap supply). Sentiment recently better towards commodities. Oil and other prices recovering, but analysts still expect prices to remain lower for longer. Need for cutbacks in excess global primary commodity capacity and production in order to rebalance commodity markets.

25. Recycling Industry Outlook… Focus on safety, operational efficiency, quality and product diversification Cash is still king Targeted investment Cyclical, evolving industry with longer term positive trends Opportunities for ISRI and CARI to educate policymakers and the public about our industry

26. Thank You Joseph Pickard Chief Economist & Dir. Of Commodities Institute of Scrap Recycling Industries, Inc. 1615 L Street, NW Washington, DC 20036 I (202) 662-8542 joepickard@isri.orgjoepickard@isri.org I www.isri.orgwww.isri.org