©2017 TIRE INDUSTRY ASSOCIATION | All Rights Reserved
2018 OTR Industry Forecast63rd Off-the-Road Conference
Sawgrass Marriott – Ponte Vedra, FL February 22, 2018
Kevin RohlwingSenior Vice President of Training
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Equipment Fleet Size
Maintain75%
Reduce11%
Increase14%
Earthmoving Equipment
Source: American Road & Transportation Builders Association Market Forecast 2018
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Equipment Fleet Size
Maintain85%
Reduce3% Increase
12%
Paving & Compaction Equipment
Source: American Road & Transportation Builders Association Market Forecast 2018
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Equipment Fleet Size
Maintain69%
Reduce10%
Increase21%
Other Equipment
Source: American Road & Transportation Builders Association Market Forecast 2018
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Equipment Fleet Condition
51
42
53 54
3531
39
30
45 44
58 56
4440
5044
0
10
20
30
40
50
60
70
2014 Survey 2015 Survey 2016 Survey 2017 Survey
Percentage of Respondents w/Equipment in Need of Repair or Replacement
Earthmoving Paving/Compaction Other Total
Source: American Road & Transportation Builders Association Market Forecast 2018
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Construction
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$0
$100
$200
$300
$400
$500
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$ B
illio
ns U
SD
Year
Forecast
U.S. Total Residential Construction Starts
Source: ConstructConnect/Oxford Economics
U.S. Construction
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Residential Buildings 2016 2017 2018 2019 2020Single-Family 9% 9% 7% 5% 3%Multi-Family 15% 7% 5% 4% 3%Improvements 10% 14% 6% 3% 1%
Total Residential Buildings 10% 10% 7% 4% 2%Source: ConstructConnect/Oxford Economics
U.S. Construction
Residential Buildings 2016 2017 2018 2019 2020Single-Family 9% 9% 7% 5% 3%Multi-Family 15% 7% 5% 4% 3%Improvements 10% 14% 6% 3% 1%
Total Residential Buildings 10% 10% 7% 4% 2%Source: FMI Construction Outlook
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$0
$5
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$35
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$ B
illio
ns U
SD
Forecast
U.S. Hotel/Motel Construction Starts
Source: ConstructConnect/Oxford Economics
U.S. Construction
2016 2017 2018 2019 2020Lodging 23% 5% 5% 3% 2%
Source: FMI Construction Outlook
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$0
$3
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$12
$15
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illio
ns U
SD
Year
U.S. Sports Stadium & Convention Center Construction Starts
Forecast
Source: ConstructConnect/Oxford Economics
U.S. Construction
©2017 TIRE INDUSTRY ASSOCIATION | All Rights Reserved
$0
$10
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$30
$40
$50
2005
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$ B
illio
ns U
SD
Year
U.S. Retail/Shopping Construction Starts
Forecast
Source: ConstructConnect/Oxford Economics
U.S. Construction
©2017 TIRE INDUSTRY ASSOCIATION | All Rights Reserved
$0
$4
$8
$12
$16
$20
$24
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
$ B
illio
ns U
SD
Year
U.S. Warehouse Construction Starts
Forecast
Source: ConstructConnect/Oxford Economics
U.S. Construction
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$0
$7
$14
$21
$28
$35
2005
2006
2007
2008
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2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
$ B
illio
ns U
SD
Year
U.S. Private Office Construction Starts
Source: ConstructConnect/Oxford Economics
Forecast
U.S. Construction
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$0
$5
$10
$15
$20
$25
$30
$35
$40
2005
2006
2007
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2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
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$ B
illio
ns U
SD
Year
U.S. Industrial/Manufacturing Construction Starts
Forecast
Source: ConstructConnect/Oxford Economics
U.S. Construction
©2017 TIRE INDUSTRY ASSOCIATION | All Rights Reserved
$0
$5
$10
$15
$20
$25
$30
2005
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2015
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2018
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$ B
illio
ns U
SD
Year
U.S. Hospital & Clinic Construction Starts
Forecast
Source: ConstructConnect/Oxford Economics
U.S. Construction
©2017 TIRE INDUSTRY ASSOCIATION | All Rights Reserved
$0
$20
$40
$60
$80
$100
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
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$ B
illio
ns U
SD
Year
U.S. Total Educational Construction Starts
Source: ConstructConnect/Oxford Economics
U.S. Construction
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$0
$20
$40
$60
$80
$100
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
$ B
illio
ns U
SD
Year
U.S. Roadwork Construction Starts
Forecast
Source: ConstructConnect/Oxford Economics
U.S. Construction
©2017 TIRE INDUSTRY ASSOCIATION | All Rights Reserved
$0
$6
$12
$18
$24
$30
$36
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
$ B
illio
ns U
SD
Year
U.S. Civil (e.g., Power, etc.) Construction Starts
Forecast
Source: ConstructConnect/Oxford Economics
U.S. Construction
©2017 TIRE INDUSTRY ASSOCIATION | All Rights Reserved
$0
$200
$400
$600
$800
$1,000
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
$ B
illio
ns U
SD
Year
U.S. Grand Total Construction Starts
Forecast
Source: ConstructConnect/Oxford Economics
U.S. Construction
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Construction Forecast by State
2017 2018
Northeast 3% 3%Connecticut 19% 4%
Delaware 4% 6%
Maine 3% 6%
Maryland -5% 8%
Massachusetts 3% 1%
New Hampshire 0% 14%
New Jersey 1% 5%
New York 1% -3%
Pennsylvania 10% 3%
Rhode Island 17% 2%
Vermont 3% 4%
Virginia 3% 10%
West Virginia 23% 16%
2017 2018
South 3% 6%Alabama 2% 9%
Arkansas 5% 5%
Florida 10% 3%
Georgia 2% 7%
Louisiana -6% 0%
Mississippi 6% 13%
North Carolina 1% 6%
Oklahoma 9% 9%
South Carolina 1% 5%
Tennessee -1% 2%
Texas 3% 10%
Source: Oldcastle Business Intelligence
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Construction Forecast by State
2017 2018
Midwest 1% 4%Illinois 9% 5%
Indiana 4% 10%
Iowa -4% 1%
Kansas -8% 12%
Kentucky -9% 13%
Michigan 3% 3%
Minnesota 0% 2%
Missouri 0% 4%
Nebraska 11% 0%
North Dakota -21% 4%
Ohio 8% 0%
South Dakota -5% -1%
Wisconsin 0% 0%
2017 2018
West 8% 5%Alaska 9% 1%
Arizona 6% 9%
California 14% 3%
Colorado 8% 5%
Hawaii -9% 30%
Idaho 4% 10%
Montana -5% 8%
Nevada -2% 16%
New Mexico 5% 14%
Oregon -1% 2%
Utah 0% 3%
Washington 5% 1%
Wyoming -6% 12%Source: Oldcastle Business Intelligence
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Source: Oldcastle Business Intelligence
Construction Forecast by State
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Construction Forecast by Metro Area
Northeast 2017 2018
Baltimore, MD -6% 1%
Boston, MA 6% -1%
Buffalo, NY 2% 9%
Hartford, CT 4% 16%
New York, NY -3% -2%
Philadelphia, PA 15% -3%
Pittsburgh, PA 19% -3%
Providence, RI 14% 2%
Richmond, VA 8% 12%
Virginia Beach, VA 4% 13%
Washington, DC 0% 7%
South - San Antonio 10% 13%
South - Tampa, FL -4% 9%
South - Tulsa, OK 10% 12%
South 2017 2018
Atlanta, GA 4% 6%
Austin, TX 2% 7%
Birmingham, AL -10% 13%
Charleston, SC -12% 4%
Charlotte, NC 5% 4%
Dallas, TX 2% 10%
Houston, TX 1% 14%
Jacksonville, FL 3% 4%
Miami, FL 18% 0%
Nashville, TN -4% -5%
New Orleans, LA 38% -14%
Oklahoma City, OK -3% 17%
Orlando, FL 7% -5%
Raleigh, NC -10% 5%
Source: Oldcastle Business Intelligence
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Construction Forecast by Metro Area
Midwest 2017 2018
Chicago, IL 11% 2%
Cincinnati, OH -4% 2%
Cleveland, OH -3% 9%
Columbus, OH 0% 3%
Des Moines, IA -1% 2%
Detroit, MI 7% -1%
Indianapolis, IN 1% 12%
Kansas City, MO -7% 4%
Minneapolis, MN -8% 1%
St. Louis, MO 4% 0%
West 2017 2018
Denver, CO 2% 1%
Las Vegas, NV -2% 15%
Los Angeles, CA 15% -7%
Phoenix, AZ 5% 6%
Portland, OR 4% 4%
Riverside, CA 18% 10%
Sacramento, CA 22% 2%
Salt Lake City, UT 13% -4%
San Diego, CA 0% 9%
San Francisco, CA 28% -2%
San Jose, CA 19% 5%
Seattle, WA 4% -2%
Source: Oldcastle Business Intelligence
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Construction Forecast Segment
2017 2018
Residential 6% 6%Single-Family 9% 9%
Multi-Family 1% -1%
Non-Building 4% 4%Roads & Bridges 5% 6%
Infrastructure 3% 3%
2017 2018
Non-Residential 2% 4%Commercial 1% 2%
Hotels 8% -2%
Office 5% 6%
Retail -8% 1%
Education 5% 6%
Healthcare 1% 5%
Public Buildings 2% 6%
Industrial 0% 4%
Other Non-Residential 2% 0%
Source: Oldcastle Business Intelligence
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Construction Forecast Segment
2017 2018
Residential 10% 7%Single-Family 9% 7%
Multi-Family 7% 5%
Non-Building -4% 2%Roads & Bridges -1% 2%
Power -3% 4%
Sewage & Waste Disposal -11% -4%
Water Supply -8% -3%
Conservation -6% 3%
2017 2018
Non-Residential 2% 5%Commercial 10% 7%
Lodging 5% 5%
Office 9% 9%
Education -2% 3%
Healthcare 1% 3%
Religious -6% 1%
Public Safety -1% 1%
Amusement/Recreation 4% 4%
Transportation 1% 2%
Communication 2% 3%
Manufacturing -7% 6%
Source: FMI Construction Outlook
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U.S. Construction Forecast
• Residential markets are forecasted to have the most growth.
• General consensus on residential growth for single family housing in the area of 6-7%.
• Lack of consensus on multi-family housing ranging from -1% to 5%.
• Non-building forecasted for a slower rate of growth ranging from 2-4%.
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U.S. Construction Forecast
• Warehouse and mixed-use buildings (living units above retail) expected to increase.
• Lack of consensus on hotel construction.• Stadiums and tax-funded projects expected to
decrease without funding.• Shortage of skilled labor, especially craft workers
(carpenters, electricians, brick masons, plumbers), poses the biggest risk to long-term growth.
©2017 TIRE INDUSTRY ASSOCIATION | All Rights Reserved
Canada Construction Forecast
2017 2018Residential 1% 2%Non-Residential 1% 6%Non-Building -2% 7%
Total Construction -1% 4%
Canada Real GDP
Source: Oldcastle Business Intelligence
• Alberta, British Columbia and Ontario are expected to perform better than national GDP.
Source: IMF World Economic Outlook
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Canadian Construction Employment
2018-22 2023-27 2018-22 2023-27 2018-22 2023-27Total Employment -3% 1% 2% 2% -0.3% 1.5%Newfoundland/Labrador -13% 10% -20% 7% -18.6% 7.5%Nova Scotia -6% -4% -3% 5% -4.5% -0.2%New Brunswick -3% -1% -7% 2% -4.9% 0.6%Prince Edward Island -8% 7% 8% 8% -0.6% 7.4%Quebec -6% -2% -1% 7% -3.4% 2.8%Ontario 1% -1% 6% 1% 3.4% 0.3%Manitoba -5% 0% -9% 2% -7.7% 1.3%Saskatchewan 1% 24% -5% -3% -2.7% 5.9%Alberta 5% 1% -4% 8% -0.6% 4.9%British Columbia -13% 3% 20% -7% 0.1% -1.4%
Residential Non-Residential Total
Source: Statistics Canada, BuildForce Canada
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Residential• Concerns about possible housing bubble in Toronto
and Vancouver.Non-Residential• Benefitting from transition from natural resources
economy to a high-tech, service-based economy.Non-Building• Government investing $35B into a infrastructure
bank for public transit and green projects.
Canada Construction Forecast
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Aggregates
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May 2017
Source: SC-Market Analytics
Aggregates
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May 2017
Source: SC-Market Analytics
Aggregates
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Source: SC-Market Analytics
December 2017
Aggregates
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The Wall
• 1,600 miles of concrete wall or 44 million tons of aggregate.• Additional 2% of total aggregate consumption for the U.S.
Source: SC-Market Analytics
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• 85% - Producers who have an optimistic outlook for the aggregate industry in 2018.
• 23% - Producers whose construction material sales jumped more than 10 percent in 2017.
• 12% - Producers who expect their 2018 construction material sales to jump more than 10 percent in 2018.
• 53% - Producers who believe the aggregate industry can return to pre-recession sales levels of a decade ago.
Source: Pit & Quarry 2017 State of the Industry Survey
Aggregates
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Source: Pit & Quarry 2017 State of the Industry Survey
Aggregates
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2015 2016 2017e 2018f 2019f 2020fPublic Highway & Bridge $93.2 $93.7 $87.3 $89.4 $91.2 $93.2
Private Highway & Bridge $56.5 $60.8 $62.4 $63.3 $65.5 $67.0
Mass Transit & Rail $21.0 $19.3 $20.3 $21.3 $22.0 $22.3
Ports & Waterway $2.4 $2.0 $1.8 $1.8 $1.9 $2.0
Airport Runways & Terminals $13.7 $14.4 $15.3 $17.5 $19.1 $20.6
Public Highway/Bridge Support $55.0 $63.9 $59.9 $61.8 $63.5 $65.3
Total Construction $186.8 $190.2 $187.1 $193.3 $199.7 $205.0Total Support $55.0 $63.9 $59.9 $61.8 $63.5 $65.3Total Transport Construction $241.8 $254.2 $247.1 $255.0 $263.2 $270.3
+5% -3% +3% +3% +3%
Transportation Construction
Total Market Activity in Billions (2017 USD)
Source: American Road & Transportation Builders Association Market Forecast 2018
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• East Side Access – New York, NY ($10.8 billion)• Phase 1 of Honolulu Rail Transit – Honolulu, HI
($6.6 billion)• Phase 1 of Purple Line Extension – Los Angeles, CA
($2.8 billion)• East Link Light Rail – Seattle, WA ($2.8 billion)• Phase 2 of the Silver Line – Washington, DC
($2.8 billion)
Major Subway & Light Rail Projects
Expected to open after 2019
Source: American Road & Transportation Builders Association Market Forecast 2018
©2017 TIRE INDUSTRY ASSOCIATION | All Rights Reserved
17001900
2100 2200 2300 24002600
0
500
1000
1500
2000
2500
3000
2015 2020 2025 2030 2035 2040 2045
Total Tonnage
Total U.S Rail Freight Tonnage
Source: Freight Analysis Framework
U.S. Rail Freight
©2017 TIRE INDUSTRY ASSOCIATION | All Rights Reserved
• By 2027, traffic at U.S. airports will increase by 26%.• The FAA has identified 5 airports in 3 metro areas
that need additional capacity by 2020: Atlanta (ATL); New York (JFK, EWR, LGA); and Philadelphia (PHL).
• Demand consistently exceeds capacity at numerous major airports: JFK/EWR/LGA; San Francisco (SFO); Chicago O’Hare (ORD) and Los Angeles (LAX).
• Domestic air cargo revenue per ton miles increased by 1.8% in 2017 with 2.3% increases forecasted for the next 5 years.
U.S. Airport Capacity
©2017 TIRE INDUSTRY ASSOCIATION | All Rights Reserved
Aggregates Forecast
• Experts were forecasting a slight drop in aggregate demand in 2018 when compared to 2017.
• Nonbuilding is the biggest driver of aggregate and depends on federal, state and local funding.
• Infrastructure spending bill is a source of optimism, but the projected labor force shortage (mechanics, welders, fabricators) has aggregate producers worried about meeting the increased demand.
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Mining
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Coal Production
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Coal Production
• U.S. Energy Information Administration (EIA) estimates that coal production will decrease by 2% in 2018.
• The Appalachia region will see the biggest decrease followed by the Western region as the result of projected decline in coal exports.
• EIA projects another 2% decrease in coal production for 2019.
©2017 TIRE INDUSTRY ASSOCIATION | All Rights Reserved
Base Metals
USD/tonne 6-17 9-17 12-17 3-18 6-18 9-18 12-18 3-19 6-19 9-19 12-19
Aluminum 2081 2010 2110 2110 2090 2070 2070 2070 2070 2070 2070
Copper 6906 6350 6800 6730 6660 6590 6590 6590 6590 6590 6590
Lead 2559 2330 2490 2490 2460 2440 2410 2410 2410 2410 2410
Nickel 11698 10540 11540 11430 11310 11310 11310 11310 11310 11300 11300
Zinc 3192 2960 3230 3250 3260 3280 3290 3290 3290 3290 3290
NAB Forecasts – Quarterly Average TermsForecasts
Source: Thomson Reuters; NAB Economics
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Base Metals
Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18Aluminum USD/tonne 1750 1721 1732 1756 1755 1767 1768
Copper USD/tonne 5626 5517 5485 5587 5547 5598 5631
Lead USD/tonne 2233 2224 2230 2188 2165 2139 2118
Nickel USD/tonne 10887 10894 10942 11323 11345 11355 11376
Tin USD/tonne 20681 20245 20015 19791 19564 19326 19248
Zinc USD/tonne 2719 2692 2663 2680 2655 2636 2605
Iron Ore USD/tonne 63.9 58.9 57.0 58.2 57.3 56.3 56.4
Source: FocusEconomics
FocusEconomics Consensus Forecast Commodities Report
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Base Metal Forecast v. Actual
NAB Q1 18 FE Q1 18 Jul 2017 Jan 2018Aluminum USD/tonne 2110 1756 1902 2210
Copper USD/tonne 6730 5587 5985 7065
Lead USD/tonne 2490 2188 2270 2580
Nickel USD/tonne 11430 11323 9491 12864
Tin USD/tonne 19791 20223 20696
Zinc USD/tonne 3250 2680 2787 3441
Iron Ore USD/tonne 58.2 67.7 76.3
Forecast Actual
Source: Index Mundi
©2017 TIRE INDUSTRY ASSOCIATION | All Rights Reserved
Nickel
997110643 10204
96099155 8931
9491
10889 11215 1133511972
11495
0
2000
4000
6000
8000
10000
12000
14000
1-17 2-17 3-17 4-17 5-17 6-17 7-17 8-17 9-17 10-17 11-17 12-17
NICKEL PRICESNickel Prices USD/tonne
Source: Index Mundi
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Base Metals Forecast
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Precious Metals
Spot (3-10-17) Q1 17 Q4 17 Q4 18Gold USD/troy oz $1,200 $1,204 $1,204 $1,253Silver USD/troy oz $16.9 $17.0 $17.1 $18.1Palladium USD/troy oz $752 $728 $737 $800Platinum USD/troy oz $942 $978 $1,029 $1,100
Source: FocusEconomics
©2017 TIRE INDUSTRY ASSOCIATION | All Rights Reserved
Gold
1234 1231
1266
1246
1260
1236
1283
1314
1279 1281
1264
1331
1180
1200
1220
1240
1260
1280
1300
1320
1340
2-17 3-17 4-17 5-17 6-17 7-17 8-17 9-17 10-17 11-17 12-17 1-18
GOLDGold USD/troy oz
Source: Index Mundi
©2017 TIRE INDUSTRY ASSOCIATION | All Rights Reserved
Gold
• Weak U.S. Dollar has pushed gold prices above $1,300 an ounce.
• Zacks Investment Research is projecting earnings growth for: Barrick Gold (16.89% in 2018, 11.01% in 2019) Franco-Nevada Corp (6.81% in 2018, 14.40% in 2019) Sandstorm Gold (90.91% in 2018, 100% in 2019).
• Zacks projects earnings growth for the entire gold sector throughout 2018: Q1– 18.9% Q2 – 14.8% Q3 – 8.7% Q4 – 5.6%.
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Gold v. USD
1234 1231 1266 1246 1260 12361283 1314 1279 1281 1264
1331
101 100 99 96 95 93 93 93 95 93 92 890
200
400
600
800
1000
1200
1400
2-17 3-17 4-17 5-17 6-17 7-17 8-17 9-17 10-17 11-17 12-17 1-18
Gold USD
Sources: Index Mundi & Bloomberg Markets
©2017 TIRE INDUSTRY ASSOCIATION | All Rights Reserved
Silver
17.93
17.63
18.03
16.7516.93
16.15
16.95
17.43
16.94 16.9817.17 17.13
15
15.5
16
16.5
17
17.5
18
18.5
2-17 3-17 4-17 5-17 6-17 7-17 8-17 9-17 10-17 11-17 12-17 1-18
SILVERSilver USD troy/oz
Source: Index Mundi
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Palladium
774 799 830 822 851889
938 942984 1014
10691032
0
200
400
600
800
1000
1200
2-17 3-17 4-17 5-17 6-17 7-17 8-17 9-17 10-17 11-17 12-17 1-18
PALLADIUM USD TROY/OZPalladium USD troy/oz
Source: APMEX, Inc.
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Platinum
1031
951 949 954
927941
998
915 921
945937
1001
840
860
880
900
920
940
960
980
1000
1020
1040
2-17 3-17 4-17 5-17 6-17 7-17 8-17 9-17 10-17 11-17 12-17 1-18
PLATINUMPlatinum USD troy/oz
©2017 TIRE INDUSTRY ASSOCIATION | All Rights Reserved
Precious Metal Forecast v. Actual
Q4 – 17 Jul 2017 Q4 - 18 Jan 2018Gold USD/troy oz $1,204 $1,270 $1,253 $1,342
Silver USD/troy oz $17.10 $16.88 $18.10 $17.35
Palladium USD/troy oz $737 $890 $800 $1,032
Platinum USD/troy oz $1,029 $941 $1,100 $936
Forecast Actual
Sources: FocusEconomics & APMEX
Actual Forecast
©2017 TIRE INDUSTRY ASSOCIATION | All Rights Reserved
Mining Forecast
• Mining projections and forecasts for 2018 generally called for price drops.
• Actual performance in base metal prices since the beginning of the year indicate pricing growth for most base metals.
• Australia is forecasting iron ore prices to average $51/tonne based rising global supply and moderating demand from China.
• UBS and Citi are forecasting iron ore to average $64 a tonne.
©2017 TIRE INDUSTRY ASSOCIATION | All Rights Reserved
Mining Forecast
• If the US Dollar continues to fall, gold prices are projected to continue rising.
• Silver projections are all over the place but the consensus appears to be stable prices for 2018.
• Both palladium and platinum are expected to outperform projections for 2018.
• None of the precious metal projections indicate falling prices in 2018.
©2017 TIRE INDUSTRY ASSOCIATION | All Rights Reserved
Summary
• Construction continues to be the driving force behind any growth in the OTR industry.
• Aggregate demand was expected to fall in 2018 but optimism remains high, transportation construction is forecasted to increase and any movement on infrastructure or The Wall will lead to recovery.
• The general consensus in mining is optimism and recovery, but we are still making up for lost ground.
©2017 TIRE INDUSTRY ASSOCIATION | All Rights Reserved
Summary
Thank You!Kevin Rohlwing
Senior Vice President of Training