FORECAST REPORT FEBRUARY 2022

Monthly Metal Buying Outlook

©MetalMiner
Disclaimer

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1
Index

3 Editor's Highlights

6 Aluminum

7 Copper

8 Stainless Steel/Nickel

9 Lead

10 Zinc

11 Tin

12 HRC
13 CRC

14 HDG

15 Plate

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2
Editor's Highlights
Highlights during the month of January
! Markets recoiled in anticipation of a hawkish Federal Reserve ahead of its late January
meetings. Following the meetings, Chairman Jerome Powell suggested asset purchases
will likely halt in March as the Fed seeks to substantially reduce the central bank’s bond
holdings. Many expect the Mirst of at least 3 quarter percentage rate hikes to begin in
March to address rising inMlation now at 7%.

! Europe continues to grapple with its energy crisis. Energy prices soared in January,
which brought about further curtailments to smelter output and drove up input costs.
Spain was forced to restart a previously decommissioned coal-Mired power plant, a move
that comes at odds with the continent's larger decarbonization ambitions. Amid the
crisis, Europe faces pressure about the future of the Nord Stream 2 pipeline project. If
approved, the gas pipeline would transport around 55 billion cubic meters of natural gas
from Russia to Germany.

! Much of the debate over the Nord Stream 2 pipeline centers around the buildup of
Russian troops along the border of Ukraine. A Russian incursion in the allied country
could trigger sanctions, disrupt trade and further inMlate energy costs. Russia currently
accounts for roughly half of Europe’s gas supplies, and is a leading producer of
aluminum and nickel.

! China has continued to advance monetary easing efforts. In late January, China moved to
lower certain policy rates and lending benchmarks. The one-year and Mive-year loan
prime rates were reduced by 10 and 5 basis points, respectively, the Mirst cutback since
April 2020. Although China's interventions have alleviated some risk to the downside
over the future of metal demand, concerns persist about the overleveraged property
sector and slowed economic growth, nonetheless.

! China’s Caixin/Markit PMI index fell to 49.1 in January. And though the headline number
appears just under the magic 50 expansion/contraction threshold, the index hasn’t
touched this low since the start of the pandemic. Analysts and economists had expected
a higher reading of 50.4. The market can expect more stimulus measures to stabilize the
Chinese economy.

! The January Manufacturing PMI came in at 57.6%, down 1.2 percentage points from
December 2021 Migures but well into expansion territory. Two sub indexes of note, the
prices subindex increased by 7.9 percentage points from 68.2 to 76.1% while the
backlog of orders index fell by 6.4 percentage points to 56.4 from 62.8% from
December.

Lisa Reisman
Executive Editor, MetalMiner
[email protected]
Tel. 773.525.9750

[email protected] Tel. 773.525.9750

3
 Editor's Highlights

Thomson Reuters/Jefferies Index (CRB): February 01, 2022

2.. 280
2.. 270
2.. 260
250
2..
240
2..
230
2.. 220
2.. 210
1.. 200
190
1..
180
1..
170
1.. 160
1.. 150
1.. 140
130
1..
120
1..
110
1.. 100
Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21 Jan-22

! The CRB index traded up in January. The index closed this month at 255.12 from 232.37 at
the end of the previous month.

! Rising oil prices pushed the index upward in January. Prices closed December at $75.35/bbl
then hurtled to $86.96/bbl by Jan. 19. After a brief retracement, prices climbed once again to
close the month at $88.39/bbl.

! Gold and silver prices also rose throughout the month, as investors sought safe havens amid
rising inMlation. Prices fell during the last days of the month, however, to $1,798/oz and
$22.39/oz, respectively.

! China’s FXI climbed throughout most of the month and hit a peak of 39.68 by Jan. 20. From
there, shares began to drop and closed the month at 37.94.

! Many commodities across a range of industries remain bullish.

Resistance: 279
Support: 222

[email protected] Tel. 773.525.9750

4
 Editor's Highlights

PowerShares DB Base Metal Fund: February 01, 2022

24 24

22 22

20 20

18 18

16 16

14 14

12 12

Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21 Jan-22

! The DBB index saw steady rises throughout the Mirst month of the year. Shares climbed
from 22.26 at the end of December to 22.87 at the end of January.

! Aluminum and zinc prices traded up in January, as prices breached resistance amid tight
supply. Meanwhile, copper prices traded sideways for the third consecutive month.

! Aluminum prices crossed monthly resistance by Jan. 5, followed by the 15-day moving
average on Jan 11. Prices remained 6.56% above resistance levels to close the month.

! Meanwhile, zinc prices retraced from their monthly peak, but remained above resistance to
close the month.

! Copper diverged from other metals and skipped the price surges and fell a modest 1.48%.

! The U.S. dollar closed December at 95.67 then saw a mid-month dip. The dollar then
retraced to close January at 96.54.

[email protected] Tel. 773.525.9750

5
Aluminum Al
LME Aluminum: February 01, 2022

3200 3200
3100
3050 St Resistance 3,052
3000
St Support
2900 2900
Avg. Value 2800
2750
2700
2600 2600
2500
2450
2400
2300 2300
2200
2150
2100
2000 2000
1900
1850
1800
1700 1700
1600
1550
1500
1400 1400
Jan
2021 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
2022 Feb Mar

Market Commentary
Following a 7.0% rise in December, LME aluminum prices continued to surge in January. Prices breached resistance on Aluminum Drivers
Jan. 5, soon followed by the 15-day moving average on Jan. 11. Prices continued upwards as they chased the October high
to close the Mirst month of the year at $3,052/mt. This reMlects an 8.61% month-over-month rise. 1 European energy crisis (+)

Strong bullish sentiment and trading volumes supported aluminum’s price surge. Meanwhile, SHFE prices likewise rose 2 China production cuts (+)
throughout the month, albeit with more Mluctuation. After prices closed December at CNY 20,375/mt, prices rose 7.73%
to close January at CNY 21,950/mt. SHFE trading volumes saw more volatility than their LME counterpart, with spikes 3 U.S. dollar (-)
during a mid-month dip but also as prices rose near the end of the month.
Europe’s energy crisis continues to constrain the already tight 4 Tight supply (+)
MW Premium global aluminum supply, as soaring energy prices throughout
Europe eroded proMitability resulting in numerous smelter 5 Russia-Ukraine tensions (+)
0.35
shutdowns. Power typically accounts for at least 40% of total
production costs for smelters. Further closures and cutbacks
Section 232 tariff adjustments
6
0.30 continued to come in during the Mirst month of the year. (-)
Aluminum Dunkerque Industries, the largest smelter in France,
0.25 will cut production by 15%. The smelter’s production had been Support and Resistance Indicator
previously trimmed but, as only 60% of the plant’s electricity is
0.20 negotiated at a preferential rate, continued high energy prices 3,189 Resistance
Avg. MW Premium forced the company to further narrow production. Additional
0.15 cuts include a whopping 60% cut from Romanian metals
producer Arlo, as well as a two-year closure of Alcoa’s San
0.10 Ciprian facility in Spain. Those cuts, alongside others
throughout 2021, have reduced Europe’s aluminum capacity of
Apr-21 Jun-21 Aug-21 Oct-21 Dec-21 around 4.5 million tons, by an estimated 600,000 to 800,000 3,052 Current Price
tons.

Beware of domestic supply constraints best exhibited in the MW premium.

Uncertainty looms over the possibility of a Russian incursion into Ukraine. The leading U.S. aluminum producer, Alcoa,
issued warnings that the conMlict could have substantial implications for the global market as Russia serves as the
second-largest global aluminum producer. An invasion would likely trigger sanctions, stymie trade and further pressure
2,884 Support
energy prices. While no formal sanctions have been announced, previous sanctions in 2018 on aluminum giant Rusal
sent LME aluminum prices to a 7-year high.

Industrial Buying Strategy

Aluminum prices soared during the first weeks of the year, as prices pushed forward past short-term resistance levels. On January 11, 2022, MetalMiner
advised buying organizations to lock in 3-5 months’ worth of supply. If companies did not lock forward then, they can still lock in 3-5 month’s worth of
supply now.

[email protected] Tel. 773.525.9750

6
Copper Cu
LME Copper: February 01, 2022

108.. 10800
104.. St Resistance 10400
100.. St Support
10000
9,539
9600 9600
Avg. Value
9200 9200
8800 8800
8400 8400
8000 8000
7600 7600
7200 7200
6800 6800
6400 6400
6000 6000
5600 5600
5200 5200
4800 4800
4400
Jan
2021 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb
2022 Mar

Market Commentary Copper Drivers

While LME copper prices remain within a longer-term sideways trend, prices fell 1.48% throughout January. This
follows a modest 1.8% rise throughout December. After prices closed 2021 at $9,682/mt, prices narrowly 1 U.S. dollar (-)
breached monthly resistance on Jan. 13. Prices immediately retraced and remained beneath resistance for the
remainder of the month. Prices closed the month at $9,539/mt.
2 China monetary policy (+)
LME trading volumes offered no strong market signal as volumes remained mostly muted throughout the month.
SHFE prices continued to trade sideways, although trading volumes remained elevated on price increases 3 Market surplus (-)
throughout the month. After SHFE copper prices closed 2021 at CNY 70,380/mt, prices fell a mere 0.13% to close
January at CNY 70,290/mt.
4 Chile drought (+)
Unlike other base metals, copper skipped this month’s price surges as many expect a copper surplus in 2022 to
keep prices muted. While China’s monetary easing measures have dampened concerns over future metal demand 5 Oil price (+)
due to its over leveraged property sector, that sector and infrastructure investments still appear to be shrinking.
Property investment fell by 13.9% year-over-year in December, which brought 2021’s total investment growth to
merely 4.4%. December’s drop marks the fastest rate of decline since 2020 and the year’s total investment growth Support and Resistance Indicator
reMlects the slowest since 2016. Meanwhile, the International Copper Study Group projects a 328,000-ton reMined
market surplus in 2022.
10,276 Resistance
In spite of the expected surplus, Chile’s ongoing drought may hinder output. According to Chilean miner
Antofagasta, water shortages from a decade-long drought may push output lower than last year. Output for the
company fell by 1.7% in 2021 to 721,500 mt. Output in 2022 may fall to 660,000-690,000 mt due to water
shortages. BHP Group has likewise struggled due to water supply. BHP Group downsized its smallest mine as
permits to access underground water supplies expired amid declining fresh water reserves. Such shortages have
forced mining companies to turn to seawater. According to a report released by copper agency Cochilco, mine
output in the leading copper producing nation will likely grow by 21% by 2032. To feed this output, Cochilco
anticipates seawater usage by the mining sector to expand by 167% during that same period. By 2032, seawater
will account for 68% of the water used by Chile’s mining sector.

Meanwhile, copper prices took cues from the Federal Reserve. In the days leading to the Jan. 25-26 meetings, LME
9,539 Current Price
prices fell by more than 2% as the market anticipated a March rate hike to Mirm the dollar. LME copper prices
managed to brieMly rebound, but fell once again after the Federal Reserve indicated monetary policy may tighten 9,442 Support
faster than expected, which, in turn, lifted the dollar.

Industrial Buying Strategy

As copper prices continue to consolidate and trade sideways, uncertainty can hit positions while prices struggle to find a direction.Traders have used this
opportunity to get in and out at more or less the same price to scalp the market. Therefore, buying organizations can continue to buy what is needed and
hold off on short-term and long-term positions until further alerts and notice.

[email protected] Tel. 773.525.9750

7
Stainless Steel Ni
Stainless Steel 304 2B 14ga ($/lb) and LME Nickel: February 01, 2022
2.0 2.051 24K

Avg. Support 22,350

22K
1.8 Avg. Resistance
Avg. LME Nickel
20K
Avg. 304 2B 14ga
1.6
18K

16K
1.4

14K

1.2
12K

1.0 10K
2020
May-20 Jul-20 Sep-20 Nov-20 Jan-21
2021 Mar-21 May-21 Jul-21 Sep-21 Nov-21 Jan-22
2022 Mar-22

Market Commentary Stainless Steel Drivers

U.S. Mlat-rolled stainless supply remains under strict allocation, but imports continued to rise throughout 2021 to bridge
the U.S. supply gap. In the Mirst quarter of 2021, cold rolled stainless imports to the United States averaged just under
22,000 mt per month. Imports continued to rise throughout 2021, as November imports totaled over 42,000 mt and 1 Limited stainless capacity (+)
December’s preliminary import Migures totaled over 52,000 mt. Indonesian imports accounted for over 12,000 mt in
December, the same amount Indonesia shipped in the Mirst eleven months of 2021. Preliminary U.S. Census data reports 2 Increased imports (+)
January import licenses have been Miled for approximately 36,000 mt of cold rolled stainless sheet and strip. If imports
continue at levels above 35,000 mt per month, the 20,000 mt that Allegheny and Tsingshan Stainless (A&T) would
produce at Midland’s DRAP line may not be necessary. 3 Surging nickel prices (+)

North American Stainless (NAS), Outokumpu (OTK) and Cleveland Cliffs (Cliffs) continue to specify the alloys and the 4 Construction spending (+)
products that will be accepted within an allocation. 201, 301, 430 and 409, for example, are restricted by mills as a
percentage of the total allocation.
5 U.S. dollar (-)
Buyers will continue to experience limited availability of 430, 201 and 301, especially if the volume does not have a
supply agreement. Any spot requirements or increases in demand of these alloys may result in having to substitute 304. Nickel Support and Resistance
Although the majority of imports are 304, some importers have begun to bring in 430. As most imports are subject to
Section 232 tariffs of 25%, most import pricing remains at a premium to domestic producers.
Indicator

The U.S. stainless Mlat-rolled producers have not announced any price increases for February. Outokumpu did not follow 23,471 Resistance
NAS’ January base price increase. NAS’ 304 surcharge for February is $1.2060 / lb, an increase of $0.0325 / lb from
January. Note: The avg. 304 price is a "mill to service center" price, not a "service center to end user" price.

Nickel
Like other base metals, LME nickel prices surged in January. Following a 3.11% rise throughout December, prices rose 22,350 Current Price
7.71% during the Mirst month of 2022. Prices continued to increase to new all-time highs throughout the month. Prices
retraced slightly during the last weeks of January, but closed the month well above January's resistance at $22,350/mt.

Meanwhile, SHFE prices mirrored the LME price trend. After prices closed December at CNY 152,080/mt, prices rose
7.67% throughout the month to close January at CNY 163,750/mt. Tight supply, amid strong global demand and falling
LME warehouse stocks spurred trading momentum. LME warehouse stocks plunged to their lowest levels since 2019 as 21,057 Support
prices surged. Demand continues to grow from the electric vehicle sector.

Industrial Buying Strategy

Nickel prices have also surged and have begun showing immense bullish sentiment and price action from a technical standpoint. Nickel prices could rise
as a confirmation of trend continuation that comes after prices rebound from this retracement. Buying organizations can lock in 3-5 months' worth of
demand.

[email protected] Tel. 773.525.9750

8
Lead Pb
LME Lead: February 01, 2022

2440 2440

2360 St Resistance 2360

St Support
2280 2,275 2280
Avg. Value
2200 2200

2120 2120

2040 2040

1960 1960

1880 1880

1800 1800

1720 1720

1640 1640
1560 1560
Jan
2021 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
2022 Feb Mar

Market Commentary Lead Drivers

After prices traded sideways with a nominal 0.61% fall throughout December, LME lead prices followed other base
metals upward most of the month, but retraced during the Minal week for an overall 0.61% decline throughout 1 U.S. dollar (-)
January. Prices zigzagged around monthly resistance mid-month. By Jan. 25, the 15-day moving average ofMicially
breached resistance. Prices began to decline, however, to fall back beneath resistance and were soon followed by the
15-day moving average. Prices closed January at $2,275/mt. Meanwhile, LME trading volumes remained strong 2 China smelting restrictions (+)
throughout the month, with slight elevation on mid-month price increases.

SHFE lead prices mirrored the LME price trend in January. The SHFE lead price closed in January at CNY 15,210/mt 3 Freight rates (+)
after prices closed December at CNY 15,300/mt. Trading volumes remained variable, with spikes on both the upside
and downside, to offer no clear market signal.
4 Restarted capacity (+)
China’s restrictions on smelting activity in the lead-up to the 2022 Winter Olympics, due to take place Feb. 4-20, plus
current treatment charges on concentrates have kept the lead market stagnant. As the treatment charge discounts on
lead concentrates are not high enough, it is difMicult to proMitably process concentrates now. Support and Resistance Indicator
Efforts within China to maintain heating during the winter have also diverted power from smelters. The weather
forecast for Hohhot, capital of Inner Mongolia, shows an average low temperature of -17 degrees Celsius (about 1 2,422 Resistance
degree Fahrenheit) into the week starting Jan. 16. Lead smelting occurs in Inner Mongolia, but carbon emission caps
placed by the Chinese central government on the autonomous region in July had already curtailed production there.

In addition to subdued smelting activity, freight rates for the import of concentrates as well as the export of Minished
material remain high. The Global Container Freight Index on Jan. 7 was $9,167 for a 40-foot container. That price
may be off 17.5% from $11,109 on Sept. 10, yet it is more than twice the $3,452 quoted on Jan. 1, 2021.

The secondary market, rather than the primary, also plays a large role in supplying reMined lead. German smelter
Berzelius Stolberg will likely start acquiring lead concentrate stocks from April in anticipation of a June restart.
Heavy rains and Mlooding in July caused extensive damage to the plant in North Rhine-Westphalia, requiring new Current Price
2,275
cabling, switch junctions and transformers. Inclement weather also damaged rail connections to the smelter,
delaying the targeted October restart.
2,232 Support

Industrial Buying Strategy

Lead prices continued to trade sideways and consolidated. Should prices break resistance, buying organizations can expect a trend change. However,
buying organizations should lock in for only what they need as prices may not have the strength to increase based on volume. Short-term and long-term
buying is susceptible to loss.

[email protected] Tel. 773.525.9750

9
Zinc Zn
LME Zinc: February 01, 2022

3900 3900

3700 St Resistance 3700

3,645
St Support
3500 3500
Avg. Value
3300 3300

3100 3100

2900 2900

2700 2700

2500 2500

2300 2300

2100 2100

1900 1900
1700 1700
Jan
2021 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
2022 Feb Mar

Market Commentary Zinc Drivers

Following an 8.69% rise throughout December, LME zinc prices continued their ascent and rose an additional 2.99%
during January. After prices closed December at $3,539/mt, prices rose to narrowly breach resistance on Jan. 5. Prices
1 Energy prices (+)
retraced within range the following day, but zigzagged around resistance during the remainder of the month to close
the month above resistance. The 15-day moving average breached resistance on Jan. 28. Prices closed January at
$3,645/mt. 2 Logistics constraints (+)

LME trading volumes offered no strong market signal as they remained mostly steady throughout the month. Production cuts (+)
Meanwhile, SHFE zinc prices mirrored the LME price trend. Trading volumes also remained steady throughout the
3
month but saw a spike in tandem with a late-month price increase. After prices closed December at CNY 24,210/mt,
prices rose to close January at CNY 25,295/mt. 4 Market deMicit (+)

DifMiculties in logistics as well as China’s energy supply issues have continued to impact the global zinc market and Resumed production (-)
5
create a deMicit of the base metal. China has currently directed its energy supplies for heating homes through the
country’s winter, which consequently diverts power from smelters. Smelting activity is also slowing in China ahead of
the 2022 Winter Olympics, as part of an effort to improve air quality in the Chinese capital. Support and Resistance Indicator

While Nexa Resources reported in December that road blockages to the Cerro Lindo zinc mine in Peru ended, global
supply chain difMiculties remain. 3,868 Resistance

The deMicit for 2022 now stands at 300,000 metric tons, up by almost two-thirds from predictions of 180,000 metric
tons in December. While concerns exist about inMlation and the Coronavirus’ omicron strain, it doesn’t appear to have
substantially rattled zinc markets.

In Western Europe, Netherlands-headquartered Nyrstar placed its Auby plant on care and maintenance in response to 3,645 Current Price
“historically high” energy prices. Auby is in northeastern France and needs 730 GWh of energy to produce 170,000
metric tons per year of zinc. Meanwhile, due to the same reasons, Glencore closed its Portovesme zinc plant. Between
the two plants, zinc production has now been curtailed by 260,000 tons.

Also in Europe, the Tara zinc mines in the Republic of Ireland partially resumed production in December after Mlooding
the previous month prompted the Swedish owner and operator to halt production. A Mire also occurred at Tara in late
December. While there were no reports of injuries to workers on site, it was unclear if the incident further impacted 3,392 Support
production.

Industrial Buying Strategy

Zinc prices began to rise steadily. As prices begin to cross multiple moving averages and several other indicators across all time frames from a technical
perspective, prices could rise soon for the next couple of weeks and months. Organizations can lock 3-5 months’ worth of demand now and look to do
so on market dips.

[email protected] Tel. 773.525.9750

10
Tin Sn
LME Tin: February 01, 2022

43800
43000 41,975
St Resistance 42200
40600 St Support
40600
39000
38200
37400
35800 35800
34200
33400
32600
31000 31000
29400
28600
27800
26200 26200
24600
23800 23000
21400 21400
19800
19000
18200
16600 16600
15000
14200
13400

Jan
2021 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
2022 Feb Mar

Market Commentary Tin Drivers

Like other base metals, tin prices surged in January following a nominal 0.38% decline in December. LME tin prices
climbed upwards to Mirst cross monthly resistance on Jan. 13. Prices brieMly retraced within range before they rose back 1 Energy shortages (+)
above resistance on Jan. 18. Tin’s 15-day moving average soon followed and surpassed resistance on Jan. 22. Prices
narrowly dipped beneath resistance, once again, on Jan. 25, but breached the level the following day and closed the
month at $41,975/mt, for an overall 7.35% increase. 2 Production cuts (+)

LME trading volumes offered no clear market signal, as volumes remained high on both the upside and downside.
Meanwhile, SHFE tin prices behaved comparably to their LME counterparts. After prices closed December at CNY 3 Market deMicit (-)
285,770/mt, prices rose throughout the month to peak on Jan. 20, before a slight retracement to close January at CNY
329,600/mt. SHFE trading volumes remained muted throughout the Mirst weeks of the month, but spiked as prices
retraced, and jumped further when prices resumed their ascent during the closing days of the month. 4 Increased demand (+)

Tin will continue to see a deMicit in 2022 on growing demand and energy issues that could limit smelting activity. The
return of several smelters back on stream, however, are likely to lessen it. Support and Resistance Indicator

Malaysia Smelting Corporation ended its force majeure and could supply an additional 10,000 metric tons of reMined
tin. Chinese tin smelter Gejiu Kaimeng in Yunnan Province has also completed maintenance work that it began in 44,208 Resistance
December. That plant can also produce 600-700 metric tons of reMined material per month.

The deMicit could fall by 5,000 metric tons less than the International Tin Association’s estimation of 10,000-15,000
metric tons for 2021. Factors within China itself, nonetheless, will likely impact reMined production in that country.
Efforts to divert energy towards heating for the winter have taken away from smelting activity in the country, analysts
have said.
41,975 Current Price
Meanwhile, China supplies much of the mining workforce in Myanmar's neighboring Wa state, an autonomous region.
While a pilot opening between the two areas has occurred, reports indicated that perishables moved across the
Myanmar-China border — but there were no reports of tin concentrates moving.

Adding to the deMicit is continued strong demand for tin-consuming products, particularly with new technologies
coming into the market. 40,239 Support

Industrial Buying Strategy

Tin prices remain at price discovery levels. As tin continues to rally given the amount of directional strength and the time period that it has run through,
buying organizations should not rule out any short-term corrections as a short-term rejection or market makers’ profit taking. MetalMiner provided a 3-5
month buying signal on Jan 22. Buying organizations that did not lock then can take a similar strategy and buy on the price dips.

[email protected] Tel. 773.525.9750

11
HRC HRC

MetalMiner IndX (SM) HRC: February 01, 2022

1900 1900
1800 St Resistance 1800
1700 St Support 1700
1600 Avg. Value 1600
1500 1500
1400 1,393 1400
1300 1300
1200 1200
1100 1100
1000 1000
900 900
800 800
700 700
600 600
500 500
400
Jan
2021 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
2022 Feb Mar

Market Commentary
HRC Drivers
HRC prices continued their descent during the Mirst month of the year. Following an 11.5% decline in December, prices
saw week-over-week declines throughout January. By Jan. 21, prices ofMicially fell below long-term support to mark the
end of the bull run. Prices continued downward and closed the month at $1,393/st for an over 12.22% monthly decline. 1 Construction spending (+)
Mill lead times moved to 3-4 weeks.

Opposite to their U.S. counterpart, Chinese HRC prices traded sideways with a slight 2.06% rise through January. This 2 China economic slowdown (-)
follows a 1.5% rise throughout December where prices closed at CNY 4,850/mt. Prices closed January at CNY 4,950/mt.

The start of the long awaited SDI Sinton, TX Mlat-rolled mill will add further downside price pressure. The mill, 3 New capacity (-)
originally slated to come online in mid-2021, following numerous delays attributed to supply chain issues, weather
challenges and the pandemic, will likely come onstream by the end of February. While the Sinton facility has an annual
capacity of 3 million short tons, output estimates for 2022 stand at 2 million short tons. Also expected to come online Section 232 tariff adjustments
4
this year, North Star BlueScope’s Delta, Ohio expansion which will add an additional 850,000 metric tons to its current (-)
2.1 million metric ton capacity. The mill will begin production in June and reach full output within 18 months.
Support and Resistance Indicator
Further down the road, U.S. Steel announced plans to build a $3 billion mill in Osceola, Arkansas. Construction will
likely begin early in 2022 and operational in 2024. The mill will boast two electric arc furnaces to bring its annual
capacity to 3 million short tons. Nucor also chose a location for its upcoming Mlat-rolled mill. The steelmaker will 1,464 Resistance
construct a $2.7 billion mill in Mason County, West Virginia that boasts a 3 million short annual capacity. Once started,
construction will take two years to complete. No dates regarding commencement or completion of construction were
released.

As domestic steel capacity expands, U.S. steelmakers lean toward scrap. Cleveland-Cliffs, North Star BlueScope as well 1,393 Current Price
as Nucor have begun to acquire scrap yards in recent months to feed expanded EAF capacity. Investments in scrap
processors from steelmakers exceeded $1 billion in 2021. EAFs currently account for roughly 70% of U.S. steel
production, a share which will likely grow to at least 10 million tons by the end of 2024.

Meanwhile, for 2021, adjusted production totaled 1,785,000 net tons, according to the American Iron and Steel
Institute. This reMlects a 9.5% year-over-year increase.

The Architecture Billings Index (ABI) remains in growth for the eleventh consecutive month but down to 51 in 1,269 Support
December from 52 the month prior.

Industrial Buying Strategy

HRC led the way in steel declines during the first month of the year. As HRC prices continue to retreat from last year’s peak, industrial buying
organizations can continue to purchase as needed.

[email protected] Tel. 773.525.9750

12
CRC CRC

MetalMiner IndX (SM) CRC: February 01, 2022

2200
2100 2100
2000 St Resistance 2000
1900 St Support 1900
1,835
1800 Avg. Value 1800
1700 1700
1600 1600
1500 1500
1400 1400
1300 1300
1200 1200
1100 1100
1000 1000
900 900
800 800
700 700
600
Jan
2021 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
2022 Feb Mar

Market Commentary CRC Drivers

Like HRC, CRC prices showed week-over-week declines throughout the month following a 4.4% drop in December. CRC
prices also fell below long-term support, and continued to retreat from last year’s peak. The price closed the month at 1 Construction spending (+)
$1,835/st, for an overall 9.11% monthly decline. Mill lead times for CRC moved to 6-7 weeks.
Limited automotive production
Like Chinese HRC, Chinese CRC prices traded sideways in January. Following a 2.08% increase in December prices rose 2 (-)
a nominal 0.19% during the Mirst month of the year. Prices closed December at CNY 5390/mt and currently stand at
CNY 5,400/mt. 3 China economic slowdown (-)

Healthy construction demand and increased activity from the auto sector are likely to push up northern European
prices for hot rolled coil in January and into February, following decreases from the previous month. Mills are now 4 New capacity (-)
transacting material at around €900-920 ($1,020-1,045) per metric ton exw, down from previous transactions
€980-1,000 ($1,110-1,135) heard in late December. Cold rolled coil normally carries a premium of €80-120 ($90-135) Section 232 tariff adjustments
5 (-)
per metric ton. An onslaught of imports from Turkey, where producers targeted Europe in response to hyperinMlation
in that country, had put downward pressure on domestic prices for the Mlat-rolled product. Indian producers were also
targeting Europe with offers of as low as €820 ($930) per metric ton CFR Europe. Support and Resistance Indicator

Meanwhile, the UK may be next in line to receive some exemptions from the Section 232 tariffs implemented in 2018.
1,941 Resistance
Discussions resumed in mid-January, as U.S. inMlation hit 7% in December, a 39-year high. Should an agreement be
reached, the UK would likely follow the EU with a tariff rate quota system. Under the terms of the EU’s negotiated
quota, the EU may now ship up to 3.3 million tons of steel into the U.S. without the 25% duty. Japan and the U.S. remain
in negotiations, while South Korea has requested similar discussions.

In China, steel output dropped in 2021 as the nation grappled with its energy crisis, in addition to its carbon emissions
and pollution goals. According to the China Iron and Steel Association, output fell by 35 million tons from 2020 to an
estimated 1.03 billion tons. Steel demand is expected to remain on pace with 2021. While production will likely grow in 1,835 Current Price
2022, some curbs will remain in place. Olympics-related cuts will expire in mid-March, but China remains unwavering
in its carbon emissions targets. In the recent Mive-year plan, goals include cuts to energy intensity for steel production
by 2%, curbs to coal consumption in the steel sector, potentially staggered production in the steel sector as well as
closures or relocations for steel mills that don’t meet the state’s pollution standards. While the document made no
mention of speciMic carbon emissions targets for steel, the sector accounts for roughly 15% of China’s carbon emissions.
As such, continued control measures over steel output appear likely. 1,750 Support

Industrial Buying Strategy

While CRC prices have fallen more slowly than HRC, CRC prices continue to show week-over-week declines. As such, industrial buying organizations
should continue to purchase as needed.

[email protected] Tel. 773.525.9750

13
HDG HDG

MetalMiner IndX (SM) HDG: February 01, 2022

2300
2250
2150 St Resistance 2150
St Support 2050
2000
1950
Avg. Value
1850 1,838 1850
1750
1700
1650
1550 1550
1450
1400
1350
1250 1250
1150
1100
1050
950 950
850
800
750
650 650
Jan
2021 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
2022 Feb Mar

Market Commentary HDG Drivers

Like HRC and CRC, HDG prices showed consistent declines throughout the month. Following a 2.6% fall during
December, prices continued downward to close the month at $1,838/st. Prices fell below long-term support, January’s Limited automotive production
closing price reMlects a 10.34% month-over-month decline. Mill lead times moved to 6-7 weeks. 1 (-)

Chinese HDG prices, like HRC and CRC, traded sideways during January. Prices rose 7.51% to close December at CNY 2 Construction spending (+)
6,870/mt. Prices held Mirm at that price during the Mirst month of the new year.
3 China economic slowdown (-)
Auto sales in China fell for the eighth consecutive month. December auto sales hit 2.79 million units, according to the
China Association of Automobile Manufacturers, for a 1.6% year-over-year decline. While auto sales slowed due to the
semiconductor shortage during the latter half of 2021, total annual sales grew to reach 26.28 million units, a 3.8% 4 New capacity (-)
year-over-year rise.
Section 232 tariff adjustments
5 (-)
U.S. automotive production picked up month-over-month in December. Output expanded 14.8% to 1.78 million units,
according to the Federal Reserve. In spite of this growth, production remains limited by semiconductor shortages.
According to the Susquehanna Financial Group, lead times for chips have once again increased and now sit at about 26 Support and Resistance Indicator
weeks. According to a survey conducted by the Department of Commerce, semiconductor inventories at manufacturers
requiring chips fell to a median of 5 days in 2021, as compared to 40 days in 2019. Manufacturers reported that the
1,950 Resistance
shortages will likely continue for at least six more months. Expanded industry demand drove the shortages as chip
manufacturing facilities report operating at or beyond 90% capacity in 2021 (17% higher than 2019). Demand
continues to outpace supply.

Largely due to such shortages, Toyota will cut production in February at its North American plants by as much as
25,000-30,000 vehicles. This will bring the automakers total automotive cuts to 65,000-80,000 vehicles for the Mirst two
months of the year. According to estimates from AutoForecast Solutions, during the Mirst half of January alone, total
North American automotive production was held back by around 175,000 vehicles. 1,838 Current Price

Preliminary reports from the U.S. Census Bureau showed a 0.2% rise in construction spending from November to
December. Revised spending reached a seasonally adjusted annual rate of $1,636.5 billion in November and increased
to $1,639.9 billion in November. Manufacturing, commercial and residential construction spending showed the largest
month-over-month growth, while public safety and lodging saw the most substantial contraction. Privately-owned
housing units authorized by building permits also rose. The U.S. Census Bureau reported a 9.1% increase from 1,734 Support
November to December.

Industrial Buying Strategy

As with other forms of steel, the bull trend appears to be over for HDG. As prices continue to retreat from the late September peak, industrial buying
organizations should continue to purchase as needed.

[email protected] Tel. 773.525.9750

14
Plate PLATE

MetalMiner IndX (SM) Plate: February 01, 2022

2000 2000
1900 1900
St Resistance 1,838
1800 1800
1700 St Support 1700
1600 1600
1500 1500
1400 1400
1300 1300
1200 1200
1100 1100
1000 1000
900 900
800 800
700 700
600 600
500
Jan
2021 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
2022 Feb Mar

Market Commentary Plate Drivers

While plate prices remain beneath their peak, prices traded sideways during January, with a mere 0.97% decline
throughout the month. Following a 1.6% decline throughout December, prices fell slightly to close the Mirst month of the
year at $1,838/st. Mill lead times moved to 4-6 weeks. 1 China economic slowdown (-)

Like other forms of Chinese steel, Chinese plate prices traded sideways throughout January. This follows a nominal
0.75% decline throughout December where they closed at CNY 5280/mt. Prices saw a mere 1.14% fall throughout 2 Construction spending (+)
January to close the month at CNY 5,220/mt.
In spite of closing December at $75.21/barrel, WTI
US HRC vs Plate crude oil prices rose by more than $10/barrel
throughout January. This follows another almost
3 U.S. infrastructure bill (+)
$10/barrel rise between November and December.
HRC US 2300 Oil prices now stand at 88.15/barrel. Meanwhile,
2100 markets anticipate that on the heels of its upcoming 4 Oil prices (+)
2K Plate US
1900 February meeting, OPEC+ will likely continue with a
1700 planned oil output increase in March. OPEC+ failed
1500 to meet its December target, with a shortfall of Support and Resistance Indicator
1300 around 790,000 bpd. Certain members including
Nigeria and Angola have struggled to raise 1,955 Resistance
1100
1K production levels due to underinvestment in
900 infrastructure and development in recent years.
700
500 Amid staggering oil prices, the Department of
Energy announced the release of 13.4 million
May-21 Aug-21 Nov-21 barrels of oil from the Strategic Petroleum Reserves.
The release had been authorized in November and 1,838 Current Price

is part of a larger plan to release a total of 50 million barrels. Thus far, almost 40 million barrels have been released. By
comparison, the U.S. Energy Information Administration reports that in 2020, the U.S. consumed an average of roughly
18.19 million barrels of petroleum per day. The oil release essentially provides not even 3 days' worth of supply.

The Russia-Ukraine tensions may pose a further threat to oil prices. As Russia is among the largest global oil and gas
exporters, Russia may leverage its energy resources amid such a conMlict. The cancellation of the Nord Stream 2 1,715 Support
pipeline, should an invasion occur, would add additional pressure to energy prices.

Industrial Buying Strategy

Plate prices diverged from other forms of steel but nonetheless remain beneath their peak, and the risk remains to the downside. As such, industrial
buying organizations can purchase as needed and hold off on any short- or long-term positions unless the uptrend resumes.

[email protected] Tel. 773.525.9750

15