Volume 14, Issue 9 September 2018

The Americas

U.S. nonfarm payrolls rose 201,000 and the unemployment rate held steady at 3.9% in August. Average hourly earnings for all private-sector workers increased 10 cents to $27.16, a 2.9% gain from August a year ago. U.S. employers have added to payrolls for 95 straight months, extending the longest continuous jobs expansion on record. The share of Americans participating in the labor force fell by 0.2 percentage point to 62.7% in August.

U.S. consumer spending increased 0.4% in July, pointing to strong economic growth early in the third quarter. Households spent more on prescription medication, restaurants and on accommodation. Personal income rose 0.3% after increasing 0.4% in June. Wages rose 0.4%. The saving rate slipped 0.1% to 6.7% in July.

U.S. consumer prices rose 0.2% in July. Core prices also increased 0.2%. Higher housing costs accounted for most of the increase. Overall prices rose 2.9% over the past 12 months, a gain last exceeded in early 2012. Core prices climbed 2.4% over twelve months, the most since September 2008. After inflation, hourly earnings were flat in July from a month earlier and they fell 0.2% over the past year.

The Leading Economic Index rose 0.6% in July to 110.7. The Conference Board’s coincident index rose 0.2% to 104.2 from June. However, the lagging index fell 0.3% from the previous month.

U.S. industrial production inched up 0.1% in July. Mining output, which includes oil and natural gas extraction, declined 0.3%. Utility output also dropped from June. Manufacturing output rose 0.3% in July from June and was up 2.8% from a year earlier. Capacity use was unchanged from June’s upwardly revised level of 78.1 percent. From a year earlier, industrial production was up 4.2% in July.

U.S. gross domestic product rose at a 4.2% revised annual rate in the 2ndQtr, adjusted for seasonality and inflation. GDP was earlier estimated at a 4.1% annual rate.

U.S. import prices were unchanged in July as a surge in the cost of fuels was offset by weak prices elsewhere and a strong dollar helped keep imported inflation in check. Excluding fuels and food, import prices slipped 0.1% in July. Core import prices increased 1.6% in the 12 months through July. Export prices dropped 0.5% in July, the biggest decline in 14 months. Export prices for agricultural products tumbled 5.3% in July, weighed down by a 14.1% plunge in soybean prices. Export prices increased 4.3% on a year-on-year basis through July.

The U.S. government’s budget deficit widened in the first 10 months of the fiscal year, totaling $684 billion, up 21% vs. a year earlier. The federal budget deficit was $77 billion in July, 79% wider than a year ago, partly from a difference in timing of government payments. Government revenue fell 3% in July compared with a year earlier; spending grew 10%. Business and individual tax rates were cut and government spending has ramped higher.

Agriculture Secretary Perdue said the government would make $4.7 billion in payments to U.S. farmers to offset losses from trade battles and that the funds constitute an initial payment to farmers hit by tariffs from major trading partners. Soybean farmers are slated to get roughly three-fourths of the direct payments, or $3.6 billion, followed by producers of pork, cotton, sorghum, dairy and wheat.

The U.S. trade deficit posted its biggest monthly increase in almost three and a half years in July. The trade shortfall in goods and services widened by 9.5% from June to $50.08 billion. U.S. exports sank 1% from June, while imports rose 0.9% on the month. The decline in exports was led by falling shipments of soybeans, which were hit with retaliatory tariffs by China early in the month, and of civilian aircraft.

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U.S. producer prices moderated in July, as the PPI was flat from June. The core PPI was up 0.1% in July. The annual index for overall prices took a pause at 3.3% in July. Intermediate prices for steel mill products rose 1.6% in July, lifting the annual increase to 12.4%. "For now, manufacturers are absorbing some of that cost increase," said Capital Economics. "But with more tariffs in the pipeline and capacity utilization high, we suspect that it's only a matter of time before final demand inflation begins to rise more markedly."

U.S. factory orders dropped 0.8% in July and data for June was revised down 0.1% to show factory orders rising 0.6%. Orders increased 8.3% on a YoY basis in July. New orders for manufactured durable goods, down three of the last four months, decreased $4.3 billion or 1.7% to $247.2 billion. This followed a 0.9% June increase. Transportation equipment, also down three of the last four months, drove the decrease, $4.6 billion or 5.2%, to $83.0 billion.

Demand for long-lasting goods produced by U.S. factories fell in July because of a decline in aircraft sales, but underlying demand grew modestly. Orders for durable goods declined 1.7% in July. Excluding transportation, durable goods orders rose 0.2%. In the first seven months of 2018, total durable-goods orders rose 8.6% compared with the same period a year earlier. The value of new orders for primary metals (mostly aluminum, iron and steel products) grew 18% in July from a year ago.

U.S. retail sales increased 0.5% in July and 6.4% vs. a year ago, more than double the 2.9% rate of inflation in the year to July. Americans boosted their spending at restaurants and bars at a 1.3% pace in July. Gas station sales increased at a 0.8% annual rate. Spending at restaurants and bars has jumped nearly 10% from a year earlier. Online shopping rose 8.7% in July from a year ago.

Consumer debt rose by $16.6 billion in July, up sharply from a gain of $8.5 billion in June. The category that includes credit cards rose by $1.3 billion after shrinking by $1.2 billion in June. The category that covers auto and student loans surged by $15.4 billion after an increase of $9.6 billion in June. It was the largest gain since an increase of $17.9 billion last November.

U.S. construction spending ticked up 0.1% in July, led by a 0.6% increase in homebuilding and the publicly funded building of schools and highways. The slight July increase brought total construction spending to an annual rate of $1.32 trillion, 5.8% higher than a year ago. Nonresidential construction tumbled 0.3% in July. Public construction rose 0.7%, including a 2.1% jump in the building of schools and a 0.4% advance in constructing highways and streets.

The S&P CoreLogic Case-Shiller Index for home prices for the U.S. rose 6.2% in June, down from the 6.4% year-over-year increase reported in May. The Case-Shiller 10-city index gained 6% over the year, down from 6.2% in May. The 20-city index gained 6.3%, down from 6.5% in May. Even with the slowdown, gains are still twice their long-term average.

Existing U.S. home sales declined in July for the fourth-straight month, falling 0.7% from June to an annual rate of 5.34 million units. Compared with a year earlier, sales in July were down 1.5%. A shortage of homes on the market has fueled a sharp rise in prices, which rose 4.5% in July from a year earlier to a median price of $269,600. The average interest rate on a 30-year fixed-rate mortgage in July was 4.53%, up from 4.03% in January and 3.97% in July 2017.

U.S. housing starts grew 0.9% in July to an annual rate of 1.168 million. Residential build-ing permits also jumped, rising 1.5% from June to an annual pace of 1.311 million last month. Still, a gauge of U.S. home-builder confidence fell in August after plateauing in July and declining for much of 2018.

U.S. new home sales fell 1.7% in July to an annual rate of 627,000. It was the second-straight monthly drop and the latest in a string of economic data pointing to a soft run in the housing market amid an otherwise booming economy. A 52.3% decline in new-home sales in the Northeast helped drive down overall sales in July. Still, overall new home sales grew 7.2% in January through July from the prior year.

U.S. worker productivity increased at an annualized rate of 2.9% in the 2ndQtr from the first, the strongest quarterly gain since the 1stQtr of 2015. But from a year earlier, productivity advanced 1.3%, matching the average rate of growth from 2007 to 2017.

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U.S. manufacturing accelerated in August, with new orders, production and employment in the sector growing. The ISM index of activity in the factory sector rose to 61.3 in August from 58.1 in July. Sales of factory-made products, or new orders, output and employment all grew at a faster pace in August. Meanwhile, a measure of inflation grew at a slower pace.

The ISM non-manufacturing index rose to 58.5 in August from 55.7 in July. The report indicates service industries, such as health care and retail, which make up the bulk of economic output, are still in healthy shape. Business activity and employment are growing at faster paces, and prices are increasing at a slower pace.

Consumer confidence as measured by the Conference Board rose in August to 133.4 from 127.9 in July. Factors including a buoyant job market and rising incomes are helping Americans feel better about the economy.

Steel imports into the U.S. were 2.978 million tons in July, including 2.179 million tons of finished steel, up 19.4% and 17.5% respectively vs. June. For seven months of 2018, total and finished steel imports were 20.862 million and 16.190 million net tons, down 10.1% and 10%, respectively vs. last year. TMP imports were down 9.5% YTD. Total finished steel import market share was 23% in July and 25%YTD.

U.S. Steel and the USW agreed to an ongoing extension of their expired labor contract. The move came as the union said the two sides are “still far from a fair agreement”. The company said it does not anticipate a strike, although union officials told members to begin strike authorization voting. The USW is also at an impasse with ArcelorMittal USA, where current contracts have been extended indefinitely, subject to a 48-hour termination notice. The two contracts cover about 31,000 workers.

Canada's government took a key step toward imposing potential new tariffs and quotas on seven imported steel products in an attempt to protect domestic producers. The measures would be applied if evidence shows producers are being harmed. Trade data for the 2ndQtr shows a spike in shipments from countries such as Brazil, India, Turkey and Germany. U.S. companies that may be impacted include AK Steel, U.S. Steel, Nucor and Steel Dynamics.

U.S. steel mills shipped 7.988 million tons in June, an 0.8% decrease from May and a 3.2% gain over June 2017. Shipments year-to-date in 2018 were 47.304 million tons, a 4.1% increase vs. 2017 shipments for six months.

U.S. raw steel production for the year-to-date through Sept. 1st was 62.997 million tons at a capability utilization rate of 77.3%. That output is up 4.0% from the 60.582 million tons made during the same period in 2017, when the capability utilization rate was 74.6 percent.

AMM’s hot-rolled coil index in late August stood at $42.68/cwt ($853.60/ton), its lowest point since mid-March. Lead times were reported at three to six weeks, and narrowing. Service centers appear to have enough stock that they can afford to suspend large buys for a few weeks to allow the downward trend to deepen. It is not clear whether the market is overreacting to the normal summer slowdown or prices have entered a correction period.

Steel prices in July were up 19% from a year ago and aluminum prices were up 18%. The Fed’s most recent report on industrial production also shows the unit volume of primary metal manufacturing growing at a comparatively slower 4.3% in July from the previous year, part of an upward trend that began in the fall of 2015. Employment in the primary metals-producing industry grew 2% in July from the prior year, matching job growth seen in the overall economy.

ArcelorMittal USA increased prices on cold-rolled and coated flat-rolled steel by $30/ton effective immediately, sending notices to customers dated August 15. The increase, which does not apply to hot-rolled coil, appears aimed at restoring a wider spread between HRC prices and CRC and coated base prices.

ArcelorMittal will resume a $330 million expansion project at its Vega plant in the Brazilian state of Santa Catarina that will raise total capacity by a third to 2.1 million tonnes a year. MT will build a new continuous annealing line and a new galvanization line, which will increase its production of specialized grades for the automotive, construction and home appliance industries. MT had put plans for the expansion on hold in 2011, citing the recession in Brazil, dampening demand for vehicles.

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The U.S. and Mexico agreed on the key sticking points that had held up renegotiating of Nafta for over a year. The deal still needs approval by the U.S. and Mexican legislatures. The agreement could help the administration reach its goal to boost U.S. steelmakers operations to 80% of capacity, targeted by earlier steel and aluminum tariffs. Under the new agreement, 75% of the content in automobiles must be sourced in North America to quality for tariff-free treatment, up from 62.5% currently. It also stipulates that 40%- 45% of auto content must be produced by workers earning at least $16/hour. This deal will not affect the existing Section 232 tariffs on steel and aluminum imports, but the matter “will continue to be discussed”.

The Commerce Dept. has received more than 37,000 steel tariff exemption requests. The agency ruled on 2,871 of those requests as of August 20, approving 1,780 of the applications and denying 1,091. The department turned back more than 6,000 requests for what it called "filing errors" by applicants, who can fix and resubmit their requests. Rejected applicants have criticized the department for taking sometimes misleading objections by domestic suppliers at face value and for not allowing importers a chance to rebut their arguments.

Transportation costs continue to rise as demand outpaces supply. The Cass Freight Index showed a 10.6% increase in shipments during July and a 19% jump in expenditures. Higher diesel prices are stoking intermodal demand. Per-mile truckload linehaul rates in July showed the first double-digit Y/Y increase since the index was started in 2005. Freight cost inflation was a very common topic on 2ndQtr earnings calls, cutting across many industries.

President Trump signed an order allowing targeted relief from quotas imposed under Section 232 on steel from South Korea, Argentina and Brazil, and aluminum from Argentina. The proclamation provides the same product exclusion authority for quotas that exist for tariffs. Companies can apply for product exclusions based on insufficient quantity or quality available from U.S. steel or aluminum producers. In such cases, an exclusion from the quota may be granted and no tariff owed.

U.S. auto sales fell in August as truck-fueled advances by many automakers couldn’t make up for plunging demand for passenger cars and an estimated double-digit drop at GM. The annualized rate of sales for August came in at 16.69 million, signaling the expected slowdown in the market. The SAAR was 16.73 million in July and 16.58 million in August 2017. Car sales skidded 19% in August, representing 28.9% of the market, while light-truck volume rose 10%.

Richard Trumka, AFL-CIO president, said that a new Nafta won’t work if it doesn’t include Canada, a day after President Trump indicated his willingness to proceed with a bilateral deal with Mexico alone if necessary. Trumka said his organization couldn't support the nascent trade deal between the U.S. and Mexico because its structure remains too vague.

The administration pushed back its timetable for completing an investigation into whether to impose tariffs on auto imports. Commerce Secretary Ross said it is “not clear the report will be out at the end of the month (August).” He said the delay was “in view of the negotiations” ongoing with the European Commission, Mexico and Canada. In contrast with steel tariffs, which drew support from the domestic industry, the threat to impose across-the-board auto tariffs has drawn widespread opposition, including from the auto industry.

Ford ditched plans to import its Focus compact car from China to the U.S. starting next year, citing an expected hit from import tariffs the Trump administration put into effect in July. Ford had planned to begin shipping a new version of the Focus from China, starting in the second half of 2019. But the 25% tariff now in place on U.S. imports from China upended the economic case for importing the vehicle.

U.S. buyout firm KKR is in talks to acquire Fiat Chrysler Automobile’s global auto parts business Magneti Marelli, which is valued at $3.7 billion. KKR would acquire Magneti through Japan-based Calsonic Kansei, creating an auto parts giant that could cut costs by eliminating overlapping operations. Customers would include Mazda, Geely, GM and Daimler. The combined company would oversee a network of production plants and R&D sites across Europe, North and South America and Asia.

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Europe, Africa and the Middle East Euro area economic growth moved broadly

sideways during August. The final IHS Markit Eurozone PMI Composite Output Index was 54.5, a marginal improvement on July’s 54.3. Rising activity has been registered continuously for over five years, although growth in August remained well down on the rapid rates seen around the turn of the year. Manufacturing and service rose at similar and slightly faster rates.

The EU’s top trade official proposed going beyond a U.S.-EU trade plan agreed at the White House in July and eliminating all car tariffs. Cecilia Malmström told members of the European Parliament that for autos, the EU is “willing to bring down even our car tariffs to zero, all tariffs to zero, if the U.S. does the same.” She said that while the EU has profound disagreements with the U.S. on trade policies, there is a benefit in finding “a few issues where we could work together.”

Germany's current account surplus will remain the world's largest for the third year running in 2018 at $299 billion, followed by Japan with $200 billion, according to the Ifo institute. On the other end of the spectrum, the U.S. is set to remain the country with the largest current account deficit at roughly $420 billion.

German factory orders, driven by a drop in demand from non-eurozone countries, plunged 4% in June compared to a rise of 2.6% in May. "Disappointing new orders data show tentative signs of trade tensions hitting the German economy, which doesn't bode well for the industrial outlook in the 2nd-half of the year," said the chief economist at ING Germany.

Germany's business morale improved for the first time this year in August as a "trade truce between Juncker and Trump is clearly providing relief," according to Ifo. The economic institute's closely-watched business climate index jumped to 103.8, beating July’s reading of 101.7, with current figures pointing to economic growth of 0.5% in the third quarter.

ArcelorMittal reached an agreement with Italian unions over its planned acquisition of Ilva. Under the deal, MT agrees to employ 10,700 of the current 13,500 workforce at Ilva through 2020, ~500 more than it had originally proposed, and another 2,000 will receive compensation through 2023. MT, which plans to spend €2.3B to improve safety conditions at Ilva and curbing pollution, says it wants to raise Ilva's production to 6M tonnes/year of crude steel from 4.5M currently, and to systematically increase to 9.5M tonnes/year by 2023.

New-vehicle sales in the world’s largest auto markets are entering their first sustained slowdown since the global financial crisis, as uncertainty around the U.S.’s trade policies looms. China’s car market is cooling, in part because of escalating trade tensions with the U.S. American demand for cars and trucks has topped out, following a seven-year growth streak that helped lift earnings for many car makers and auto-parts suppliers world-wide. In Europe, the car market is also softening as demand returns to prerecession levels, making profits harder to come by in a region where many car companies have long struggled to make money.

European steelmakers have held their first half pricing gains during the summer lull and are now capitalizing on supply uncertainty by raising their offers for fourth trimester business to EU customers, according to MEPS’ August market research report. Firm demand and a lack of competitively priced imports should support their pricing initiatives.

World crude steel production was 154.6 million tonnes (Mt) in July, up 5.8% vs. July last year. China’s output was 81.2Mt, an increase of 7.2% compared to a year ago. Japan produced 8.4 Mt of crude steel in July 2018, down by 2.0% on July 2017. U.S. output was 7.3 Mt of crude steel in July 2018, an increase of 4.5%. The total crude steel capacity utilization ratio in July was 77.5%, 3.8 points higher than July 2017.

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Asia/Pacific, Japan, Australia and India Japan’s exports rose 3.9% in July, much slower

than the 6.7% pace seen in June. Exports to the U.S. fell 5%, while exports to China jumped 12%. Japan's exports to the U.S. have been in a slowing trend for several months due to negative business sentiment associated with recent protectionist trade policies. Amid the global trade tension, Japan posted a trade deficit $2.08 billion in July.

Japan’s economy bounced back to growth in the 2ndQtr, avoiding a technical recession. According to preliminary numbers, it expanded by an annualized 1.9%, following a 0.9% contraction in the first quarter. The turnaround was largely due to a revival in domestic demand. The current growth rate is substantially above Japan’s long-term trend.

Industrial production in Japan was revised up to a drop of 1.8% in June after the initial release showed a decline of 2.1%. The improved reading was tied to a lift from pharmaceutical and aircraft-related parts production. The measure of factory and mines output was down 0.9% on a year-over-year view. The two-month stretch of falling production marks the worst stretch for Japanese factories since 2016.

China’s first official reading on the impact of prices from its retaliatory tariffs in July on $34 billion of U.S. goods showed consumer inflation in July rose slightly to 2.1%, giving room for further monetary easing, while industrial inflation, a main driver of profit growth, moderated to about 4.6%. Beijing said it would slap additional tariffs of 25% on $16 billion worth of U.S. imports.

Profit growth for China's industrial firms cooled for a third straight month in July, rising 16.2% to $75 billion vs. 20% in June, the latest sign of mounting U.S. trade pressure. The weaker reading came after the People's Bank of China announced tweaks to its methodology for the fixing of the yuan's daily midpoint in an effort to stabilize the currency market.

International Steels Limited (ISL) in Karachi put a second SMS cold mill into operation, adding an additional cold strip capacity of 450,000 tonnes to one million tonnes/year, making the company the largest producer of cold rolled and galvanized products in Pakistan.

Baowu Steel Group, China’s largest steelmaker, reported increases in its net profit and revenue for the first half of 2018 on higher steel prices. Net profit for the first six months of the year totaled $1.47 billion, up 62.2% from a year earlier. Revenue increased by 2.2%. Its crude steel output was up 2.7%, at 23.96 million tonnes, compared with 23.33 million tonnes in the first six months of last year.

Global sales for electric vehicles rose 77% in the 2ndQtr from a year ago to 411,000. China accounted for more than half of the quarterly tally, while Europe accounted for 22% and North America came in with 19% global market share. EVs accounted for a record high of 3.9% of all passenger car sales in China. Manufacturers accounting for a significant part of the EV gains included BYD, Tesla, Nissan, Toyota, Renault, BAIC and Chinese state-owned JAC Motors.

Auto makers exported a record $7.4 billion worth of vehicles to China in July, as European and Japanese companies took advantage of a tariff cut that excludes their U.S. counterparts. The July 1st tariff reduction to 15% from 25% allows lower retail prices, which encouraged foreign manufacturers to ship 165,000 cars into China, breaking the previous record. U.S. auto makers are blocked from the bonanza, with China adding a punitive 25% tariff on U.S.-built vehicles in July—for a total of 40%.

The U.S. auto market is still the most important market for Japan’s big three, but China is closing the gap. Nissan sold 1.59 million cars in the U.S. last year, and 1.52 million in China. Toyota sold 1.29 million vehicles in China last year, compared with 2.43 million vehicles in the U.S. At Honda, China represented 28% of global sales last year, behind 30% for the U.S. The uncertainty that clouds their U.S. business because of possible tariffs on imported cars and car parts is a factor.

Mazda and Suzuki Motor were the latest automakers to join the emissions cheaters club. They were accused of conducting improper fuel economy and emissions tests based on the results of internal investigations ordered at Japanese automakers by the nation's transport ministry after improper testing at Subaru and Nissan was uncovered.

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Industry Observations President Trump said tariffs on another $267

billion in Chinese goods are ready to go and could be rolled out on short notice, reinforcing earlier threats and signaling no end in sight for the growing trade dispute. The tariffs would be in addition to the tariffs on $200 billion in Chinese goods the administration has been preparing, which he said will “take place very soon, depending on what happens”.

Vanguard, the $5 trillion asset management firm, projects the chances of a recession by the end of 2020 are mounting and the prospects for the American stock market in the next decade have worsened appreciably. In recent years the company has put the probability of a recession six months out at close to 10% but now says the chances of one by late 2020 are 30-40%. The recession projection is based largely on interest rate expectations using two criteria: the flattening yield curve, with the Fed expected to raise shorter-term rates faster than longer-term ones and the rising credit risk for below-investment-grade bonds.

The New York Fed in its August manufacturing survey asked how businesses view the effects of recent trade policy. When asked how much, if at all, recent increases in tariffs had raised input costs—either directly or indirectly—68% of manufacturers and 44% of service firms said at least slightly, with 16% and 5%, respectively, characterizing the increase as substantial. Businesses were also asked how they saw changes in trade policy affecting the prices they paid, their selling prices, and other measures in 2018 and in 2019. For both years, roughly three in four manufacturers saw an upward effect on prices paid, and roughly half saw an upward effect on selling prices.

The Asian economic bloc vowed to double down on trade pacts to minimize economic damage in the region, which is particularly exposed to fallout from the U.S.-China trade battle. Singapore's foreign minister also urged the 10 ASEAN nations to quickly conclude talks for a Comprehensive Economic Partnership trade agreement that includes China and Japan, but not the United States.

U.S. Car and Light Truck Sales & Inventories August 2018

Company Sales Inventory

General Motors E 240,236 86

Ford Motor Co. 217,700 78

Fiat/Chrysler 194,668 81

Toyota 223,055 65

Honda 147,903 68

Nissan 112,376 53

Hyundai/Kia 111,406 57

VW Group 55,504 76

Total Cars 428,693 66

Total Trucks Total All Units

1,053,280 1,481,973

71 69

* Not all companies shown. Inventories are shown in days-will-last as of the first day of the month. Currencies in September

USD to ¥en 111.0 USD to Korean Won 1,090 Can$ to USD .7661 Chinese Yuan to USD .1489 €uro to USD 1.160 Australian $ to USD .7209 UK£ to USD 1.288 Mexican Peso to USD .0521

Global Briefing is prepared by Chuck Finnegan of the metals consulting firm Rubiconix for the use of Berlin Metals, North America’s highest quality service center provider of Tin Mill Products and Stainless Steel Strip. Contact sales@berlinmetals.com with any questions, comments or inquiries. This issue and previous briefings are archived on Berlin Metals’ web site, http://www.berlinmetals.com/.

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U.S. Manufacturers Waiting Longer for Deliveries of Parts and Components American factories are running short of parts. Suppliers of everything from engines to electronic components aren’t keeping up with a boom in U.S. manufacturing, which has lifted demand in markets such as energy, mining and

construction. As a result, some manufacturers are idling production lines and digesting higher costs. Many industrial companies have reported strong sales and profits in recent weeks, and the pace of factory hiring has more than doubled this year compared with the first seven months of 2017. However, deliveries from suppliers have slowed for 22 consecutive months through July, according to the latest survey of U.S. manufacturers by the ISM. More than one-quarter of respondents said it took longer for materials to arrive in July than June. Machinery was the hardest-hit sector. A shortage of specialized workers including welders and truck drivers is

exacerbating the crunch. The number of job openings in manufacturing climbed to 482,000 in June, the highest level in 17 years. WSJ Berlin September 2018 Brief Appendix

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Agricultural Barometer: Tariffs Taking Toll on U.S. Farm Businesses, Sentiment Turns Bearish Bailing Out Coal Will Be Hard─ It’s Simply a Matter of Sound Economics Berlin September 2018 Brief Appendix

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The Breadth & Diversity of U.S. Exports; Consumer Worry about Tariffs Growing ArcelorMittal Presentation Slides from the Jefferies August 2018 Industrial Conference Berlin September 2018 Brief Appendix

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ArcelorMittal Presentation Slides from the Jefferies August 2018 Industrial Conference Berlin September 2018 Brief Appendix

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Automotive Growth in the Developed World and Emerging Markets Berlin September 2018 Brief Appendix

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China Addressing Excess Steel Capacity – More Needs to Be Done Lower Chinese Steel Exports YTD Reflect Production Cuts Berlin September 2018 Brief Appendix

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Nippon Steel FY 2018 1stQtr Performance Report August 2: Data on HR Steel Prices, China Nippon Steel FY 2018 1stQtr Performance Report: Raw Materials Price Trends Berlin September 2018 Brief Appendix

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Timeline of Retaliatory Tariffs against the U.S.; Many Jobs Exposed to Retaliatory Tariffs The Ifo index Shows Economic Expectations Tanking in Advanced Economies Berlin September 2018 Brief Appendix

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Base Metal Prices Are Notoriously Cyclical Over Time; Is There Enough Metal to Meet Demand?

Development outside of the Western world has been the main driver of the base metal boom, and it will likely continue to push prices higher in the future. China has been the primary consumer of metals due to the country’s rapid economic expansion and with recent efforts to improve environmental standards, the country is simultaneously eliminating supplies of low quality and environmentally toxic metal production. India and Africa will also be emerging sources of base metal demand for the coming decades. In addition, there are some key developments that will include the developed world in the next wave of demand for base metals. Future demand for base metals will be driven by the onset of a more connected and sustainable world through the adoption of electronic devices and vehicles. This will require a turnover of established infrastructure and the obsolescence of traditional sources of energy, placing pressure on current sources of base metals. The transformation will be global and will test the limits of current mineral supply. Spot Market Trucking Rates Soften Somewhat after Historic Summer Run Berlin September 2018 Brief Appendix

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Commodity Prices – Nickel, Tin, Aluminum, Steel Scrap and Iron Ore

Berlin September 2018 Brief Appendix

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South Korea’s POSCO World’s Most Profitable Steelmaker The Nikkei, the world’s largest financial newspaper, evaluated POSCO as the world’s fifth-largest in crude steel capacity in its comparative analysis of last year’s EBITDA, yet the world’s first in EBITDA per ton capacity at US$164. (EBITDA is the net profit before subtracting interest, tax, depreciating and amortization indicating a company’s performance.) POSCO earned the world’s most competitive steelmaker title from the annual ranking released by World Steel Dynamics, a global steel industry research institution. Since 2002 when the annual WSD’s ranking announce-ment began, POSCO had securely retained first place for three years until 2004. After a slight dip to second place from 2005 to 2009, POSCO then recovered, attaining the world’s most competitive steelmaker for the 9th consecutive year since 2010. Steel Tariff Exemption Requests Are Piling Up – “Trapped in a Bureaucratic Nightmare” American companies looking for a way out of punishing steel tariffs say they're trapped in a bureaucratic nightmare. As they seek exemptions from the tariffs, which have sharply raised costs,

these companies describe a lengthy, opaque review process. They say the uncertainty is already hurting their businesses and may cost jobs. Companies had filed more than 20,000 exemption requests through July, arguing that they depend on imported steel and that domestic producers can't fill the gap. The Commerce Department had announced a final ruling on only 98 of them. Complicating the process, large steel companies have tried to block many requests at the last minute, giving businesses that want exemptions little or no time to respond. “There's no

particular opportunity to go back and say they're wrong,” said Alexander Schaefer, a partner at the Washington law firm Crowell & Moring, representing roughly a dozen companies that have filed exclusion requests. (Updated request numbers through August 20 appear on page four.) Berlin September 2018 Brief Appendix

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Auto Production Behaving as if the U.S. Economy Overall is in a Mild but Lengthy Recession

According to estimates released in August by the Federal Reserve, motor vehicle assemblies (MVA's) continue to slump. At 11.18 million in July 2018, that is about the same as revised estimates for June. Compared to last July, and the last model changeover, MVA's were up by 10% from what remains the low point so far. Is that a good sign for the business, that July this year is better than last year, or a bad one in that despite predictions and constant claims of a booming economy, the overall slump in production reduced the need for further reductions? It's easy to see why automakers are in production recession. Sales continue to be soft. They are classified otherwise by mainstream media outlets that note how sales of ~17 million are good when compared to prior years. The charts show something else - a clear and so far sustained inflection over three years. The auto industry isn't as important as it used to be, but it is an economic bellwether given the close relationship between slumps in production and those of the overall economy. It reflects the same limbo that has reduced U.S. economic function to little more than unusually small upturns interrupted by increasingly lengthy downturns. It never gets anywhere because, when given the chance (eurodollar reflation), it can never really get going. This time around, since the last downturn in 2015-2016, the auto business is a huge drag on economic growth.

The Univ. of Michigan Report: U.S. Households Increasingly Gloomy on Big-Ticket Purchases Berlin September 2018 Brief Appendix

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The Massive Impact of EVs on Commodities, Charging-Energy Demand

What would happen if you flipped a switch, and suddenly every new car that came off assembly lines was electric? It’s obviously a thought experiment, since right now EVs have close to just 1% market share worldwide. We’re still years away from EVs even hitting double-digit demand on a global basis, and the entire supply chain is built around the internal combustion engine, anyways. At the same time, however, the scenario is interesting to consider. One recent pro-jection put EVs at a 16% penetration by 2030 and then 51% by 2040. This could be conservative depending on the changing regulatory environment for manufacturers – after all, big markets like China, France, and the U.K. have recently announced that they plan on banning gas-powered vehicles in the near future. ___________________________________________________________________________________________ Disclaimer: This publication is for informational purposes only and should not be considered or construed as representations or advice by Olympic Steel, Inc. To the best of our knowledge, the information contained herein is accurate and reliable as of the date of publication; however, it should not be used or relied upon in regard to any specific facts or circumstances. The views set forth herein are the personal views of the authors and do not necessarily reflect those of Olympic Steel, Inc. Olympic Steel, Inc. does not assume any liability whatsoever for the accuracy and completeness of the information. OLYMPIC STEEL, INC. MAKES NO REPRESENTATIONS ABOUT THE SUITABILITY OF THE INFORMATION CONTAINED HEREIN FOR ANY PURPOSE. The contents are intended for general information purposes only and may not be quoted or referred to in any other publication or proceeding without the prior written consent of Olympic Steel, Inc., which may be given or withheld at its discretion. Berlin September 2018 Brief Appendix