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Zekelman Industries Steel Snapshot – May 2018

(by Mike Mechley, Executive VP of Strategic Procurement, www.ZekelmanIndustries.com) Platts May HR Coil is $881, no change from April. Brazil and S Korea agreed to quotas, this will reduce 2018 shipments to the US by ~1.5M tons. Quotas are retroactive to January 1st, and are by line item, a maximum of 30% of the yearly quota can be shipped in a calendar quarter. USS Granite City in production July, USS Great Lakes will then shut down 52 days for repairs. HR lead time 5-9 weeks, CR lead time 5-9 weeks. US Mills capacity utilization rate is 75.9%. Platts May CR Coil is $1,008, up $6 from April. Zinc is $1.40lb.. May Chicago #1 Bush $385 flat from April. $1 U.S. Dollar = $1.30 Canadian Dollar.

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Preston Pipe Report – The Line Pipe Market – APRIL 2018

(by Paul Vivian and Rick Preckel, www.prestonpipe.comMarket Monitor16” and Under Diameters –Continuing our discussion on the evolution of upstream line pipe demand we pick up where we left off last time. As the rig count rapidly improved after the recession, line pipe tons per rig increased at a slightly slower pace but remained more or less in line with drilling movement. There were opposing forces at work early in this time period – DUC counts were increasing, there was a slower buildout of infrastructure particularly in Appalachia, some inventory remained but wells continued to be more productive and the gathering OD (read weight) continued to increase. When the drilling rig count declined, some focus was shifted to infrastructure early on and the effects of the shift to liquids drilling starting in 2011 was resulting in more projects in the 12” – 16” range. These conditions continue today. Greater than 16” Outside Diameter – With a trade case and the 232 in the works, a lot is going on with regard to the supply side of the greater than 16” OD market. In 2017, about 995k tons of >16” were imported into the U.S. Two-thirds of the pipe is from countries in the trade case. A separate calculation shows us that 701k tons are from countries that are not exempt or are restricted by quotas. Korea imported 182k tons of large OD in 2017 and that number could go up if our understanding of the quotas is correct, but even so, large OD line pipe is in a position to experience some significant supply shift. Import Supply – February imports totaled 148,486 tons about 15,000 tons over the licenses. March licenses indicate a smll bump up to 156,388 tons. As in other products, this is a bit of a surprise that the level of imports remain this high given the uncertainity on the 232 when this pipe was ordered. The April forecast with 12 of 21 days tallied is 234,988 tons. This implies that buyers have made allowances for the possibility of tariffs. The top item for the month of February is Carbon ERW over 4 ½” not over 16”, at 45,570 tons. The landed price was $781/ton, up $5/ton from last month after two months of price drops that totaled over $100/ton.

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Pipe Logix Line Pipe Report – APRIL 2018

(by Kurt Minnich, www.pipe-logix.com Line pipe prices increased $25/ton or 1.3% in April with domestic prices up 0.9% and import prices up 1.9%.  The Pipe Logix Index has increased for 6 consecutive months providing a cumulative gain of 24% since October 2017. Overall distributor’s sentiment was unchanged in April with improvements in the price outlook and order fulfillment offset by declines in some inventory indicators.  The NASPD Index remains at 74, which continues to indicate an expanding domestic market.  Reported import volumes averaged 2.3 million tons over the past 12 months, a 68% increase compared to the previous 12 months, however, monthly import volumes have declined since October 2017.  Drilling surpassed 1,000 active rigs in April and the ratio of shipments per rig decreased below 200 tons/rig in March, a level witnessed only a few times since 2014. The details are attached.

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AISI – Press Release on Latest U.S. Imports of Steel Products – APRIL 2018

(American Iron and Steel Institute, www.steel.org – April 24, 2018) Based on preliminary Census Bureau data, the American Iron and Steel Institute (AISI) reported today that the U.S. imported a total of 3,327,000 net tons (NT) of steel in March 2018, including 2,480,000 net tons (NT) of finished steel (up 34.2% and 23.0%, respectively, vs. February final data). Year-to-date (YTD) through three months of 2018, total and finished steel imports are 8,690,000 and 6,831,000 net tons (NT), down 3.0% and 1.7%, respectively, vs. the same period in 2017. Annualized total and finished steel imports in 2018 would be 34.8 and 27.3 million NT, down 8.8% and 7.6%, respectively, vs. 2017. Finished steel import market share was an estimated 26% in March and is estimated at 25% YTD. Key finished steel products with significant import increases in March compared to February include reinforcing bars (up 215%), plates in coils (up 60%), cold rolled sheets (up 42%), hot rolled sheets (up 42%), sheets and strip hot dipped galvanized (up 30%), standard pipe (up 27%), oil country goods (up 27%), mechanical tubing (up 27%), and sheets and strip all other metallic coatings (up 12%). Major products with significant year-to-date (YTD) increases vs. the same period in 2017 include oil country goods (up 41%), hot rolled sheets (up 39%), plates in coils (up 33%), mechanical tubing (up 26%), hot rolled bars (up 17%) and line pipe (up 10%).

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Zekelman Industries Steel Snapshot – April 2018

(by Mike Mechley, Executive VP of Strategic Procurement, www.ZekelmanIndustries.com) Platts April HR Coil is $881, up $28 from March. S Korea agrees to quotas, this will reduce shipments to 70% of the 2015 to 2017 average. Quotas are being negotiated with Brazil and many other countries to avoid tariffs. Steel mills continue to keep customers on allocation based on purchase history. JSW (India) is purchasing Acero Junction with plans to restart the melting operation. HR lead time 5-9 weeks, CR lead time 5-9 weeks. US Mills capacity utilization rate is 77%. Platts April CR Coil is $1,002, up $33 from March. Zinc is $1.48lb.. April Chicago #1 Bush $385 up $10 from March.

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Preston Pipe Report – The Line Pipe Market – MARCH 2018

(by Paul Vivian and Rick Preckel, www.prestonpipe.comMarket Monitor16” and Under Diameters –Beginning in the mid-200xs, the shift to horizontal drilling was in full swing. By March 2007, the vertical rig count had begun to decline while the horizontal count continued to grow. At the same time, while

footage of line pipe per well was declining in horizontal applications, a larger pipe size was more than offsetting the weight lost. Vertical well small diameter line pipe consumption per well hasn’t changed much but consumption for horizontal wells continued to increase over the period.

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Pipe Logix Line Pipe Report – MARCH 2018

(by Kurt Minnich, www.pipe-logix.com) Line pipe prices jumped 8.3% in March with domestic prices up 7.5% and import prices up 9.5%.  Every item tracked in the Pipe Logix Index increased in March; import ERW prices averaged 12.6% higher.  Line pipe prices have increased 33% from a year ago with accelerating increases over the past two months blamed on 232 tariffs.  Distributor’s sentiment eased slightly in March but continues to indicate a strongly expanding US market.  The NASPD Index was 74 in March, down from 81 in the previous month.  Most components of the NASPD Index held steady except the price outlook, which is down from a perfectly expanding score of 100 in February to a score of 77 in March, still a strongly expanding market indicator.   Reported import volumes, which averaged nearly 200,000 tons/month over the prior 12 months declined in February to an estimated 141,000 tons.  The rig count registered a small gain in March and thus the total shipment tonnage per rig dipped below 200 tons/rig, a level witnessed only a few times since 2014.

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AISI – Press Release on Latest U.S. Imports of Steel Products – MARCH 2018

(American Iron and Steel Institute, www.steel.org – March 7, 2017) Based on the Commerce Department’s most recent Steel Import Monitoring and Analysis (SIMA) data, the American Iron and Steel Institute (AISI) reported today that steel import permit applications for the month of February totaled 2,428,000 net tons (NT)*. This was a 21.2% decrease from the 3,081,000 permit tons recorded in January and a 15.6% decrease from the January preliminary imports total of 2,875,000 NT. Import permit tonnage for finished steel in February was 1,950,000, down 16.2% from the preliminary imports total of 2,327,000 in January. For the first two months of 2018 (including February SIMA permits and January preliminary data), total and finished steel imports were 5,303,000 NT and 4,277,000 NT, down 4.2% and 3.0%, respectively, from the same period in 2017. The estimated finished steel import market share in February was 24% and is 25% year-to-date (YTD). Finished steel imports with large increases in February permits vs. the January preliminary included heavy structural shapes (up 56%), wire rods (up 35%) and wire drawn (up 21%). Products with significant year-to date (YTD) increases vs. the same period in 2017 include oil country goods (up 58%), hot rolled bars (up 29%), hot rolled sheets (up 28%), line pipe (up 27%), wire drawn (up 15%) and plates in coils (up 13%). In February, the largest finished steel import permit applications for offshore countries were for South Korea (252,000 NT, down 26% from January preliminary), Germany (111,000 NT, up 23%), Japan (110,000 NT, down 22%), China (85,000 NT, up 18%) and Taiwan (68,000 NT, down 42%). Through the first two months of 2018, the largest offshore suppliers were South Korea (591,000 NT, up 3%), Japan (251,000 NT, up 2%) and Germany (201,000 NT, up 50%).

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Zekelman Industries Steel Snapshot – March 2018

(by Mike Mechley, Executive VP of Strategic Procurement, www.ZekelmanIndustries.com) Platts March HR Coil is $853, up $104 from Feb. Steel mills continue to push prices up due to lower steel availability and increased demand. President Trump put a 25% tariff on steel products from all countries except Canada and Mexico. There will also be some countries and products that will be exempt from the tariff. USS restarting Granite City, capacity 1.4 M tons. HR lead time 5-9 weeks,CR lead time 5-9 weeks. US Mills capacity utilization rate is 77.8%. Platts March CR Coil is $969, up $88 from Feb. Zinc is $1.47lb. March Chicago #1 Bush $375 up $10 from Feb. $1 U.S. Dollar = $1.30 Canadian Dollar.

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Pipe Logix Line Pipe Report – FEBRUARY 2018

(by Kurt Minnich, www.pipe-logix.com) Line pipe prices jumped 7.6% with domestic prices up 5.8% and import prices up 10.1%.  All items tracked in the Pipe Logix Index show significant gains.  Prices have increased for 11 of the past 12 months with this month’s gain far surpassing those of previous months.  Discussions of section 232 trade protection culminated yesterday with an announcement by President Trump for a new 25% steel tariff.  Details and retaliatory positions are still forming.  Distributor’s sentiment also jumped in February with the NASPD Index at 81, which indicates a strongly expanding market and compares to 68 in the previous month.  Several of the components of the NASPD Index reached one-year highs and all of the distributors are expecting further price increases in the near term.  Import volumes trended lower through the 4th quarter 2017, bottoming out at 136,000 tons in December.  January volumes are expected to have been nearly 200,000 tons.  The rig count was up 3% in February with continued gains in the oil rig count.