Platts Metals Week Aluminum Symposium -January 17,2012 Gary Borner Vice President Spectro Alloys Corporation

Secondary Scrap Demand for Aluminum

Key Points

Who is Spectro Alloys?

What makes up the “Secondary” Industry?

What markets are competing for secondary aluminum scrap?

What is the outlook for secondary aluminum scrap?

How is scrap correlating with the different indices?

Who is Spectro Alloys?

Spectro was established in 1973 and has been under its current ownership since 1989.

Spectro Alloys has become a leader in providing comprehensive product offerings to a changing aluminum casting industry.

Spectro produces over 50 different individual customer specs in 5 different alloy groups

2011 marked a strong recovery year with sales revenue exceeding $225 million

2012 Forecast for Volume requirements will exceed 200 million pounds of aluminum scrap

2012 Capacity 130,000 m/t

Spectro has 2 reverb furnaces that have 300k and 200K lbs. holding capacity.

Spectro has 2 de-lacquering drier systems.

Spectro has a 1000hp Hammermill Shredder capable of supplying over 20,000 pounds per hour of shredded aluminum to the furnaces.

What makes up the “Secondary Industry”?

There are approximately 16 individual secondary aluminum recycling companies with 22 plant locations in the United States.

Of these 16 companies, 3 are captive to larger organizations.

The characteristics and roles of these companies provide a reliable market for the scrap collection and processing market. ◦ Secondary recyclers provide a core domestic market for

scrap aluminum. ◦ Secondary recyclers provide the bridge financing between

the scrap source and the end user of aluminum alloys. ◦ Secondary recyclers provide additional processing and

cleaning of scrap via on-site shredders and driers allowing scrap dealers to turn over their inventories quickly.

Industry Comments

Today’s secondary aluminum recycling companies have carved out individual niches that make them more financially secure than those of a decade ago.

Different than tolling scrap aluminum, secondary recyclers add value by providing casters with high quality, customized specification alloys that have been filtered and de-gassed.

What this market is looking for from the scrap processing industry is: ◦ More long term agreements tied to Platts or LME NASAAC ◦ Help with regulatory and compliance/ EHS issues in the way they

package/process their product ◦ Better segregation of scrap types by alloy and class ◦ A renewed understanding of the secondary industry scope along

with long term commitments to the industry even with the lure of all of the “export opportunity”.

Specification alloy end markets for die castings. Source: NADCA

Automotive castings which covers powertrain, engine components and some structural parts accounts for almost 80% of the market.

Non-Automotive Engines makes up and additional 11%

The larger segments of the balance is Appliance, B & C, Recreational products, Lighting and Electrical / Industrial.

Die casting shipments projected to grow in 2012 at 8% while automotive is closer to 10%

Markets for aluminum scrap exceed 15 billion pounds

Source: Export Data from AMM, others from Spectro Industry Data(Mill data is incomplete)

3,528,000,000

1,470,000,000

4,682,454,147

4,748,791,680

247,680,000

Secondary Smelters

Toll Plants (non dross)

Export

Mill

Others

Secondary Scrap Markets

Approximately 3.5 billion pounds will be consumed in 2012 by specification aluminum (Secondary) recyclers

3,528,000,000

Secondary Smelters Requirements

1

380 and 319 type scrap required (>80% of the mix) Lo Cu type scrap required (<20% of the mix)

2012 estimated growth in secondary recyclers consumption vs. NASAAC stocks in pounds. Source: Spectro industry data and LME Warehouse stocks report.

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50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

400,000,000

2012 Growth Nasaac Stocks

Secondary Recyclers Growth

NASAAC stocks by warehouse, 45% in Chicago and 33% in Detroit Source: LME Warehouse Stocks Report

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149,720 in M/T's

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Margin variation for recyclers Source: Platt’s Metals Week

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2010 - 2011 Platts A380.1 vs. Platts Auto Shreds

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Spread Adjusted for Recovery

Margin destruction for recyclers with LME indices Source: Platts Metals Week and Spectro

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Scrap comes in….

Scrap Dealers / Marketers Supply Funnel

Auto Salvage Scrap

Peddler

Scrap

Industrial

Scrap

Where will it go?

“Secondary” recycler

Export

Toll (Rotary) Mills/Cast Houses

Choices

Trends and take aways

Newer markets for aluminum scrap will continue to grow. North American demand will grow as “re-shoring” will

accelerate in the next few years. China’s population and labor force will peak in the next 5

years potentially redirecting where scrap will be sent Exports will continue to grow along with the domestic

market segments. Primary aluminum will be a “wet blanket” for scrap prices

as more consumption converts from P1020 to scrap for the foreseeable future.

Margins will tighten as competition for scrap increases while aluminum prices climb a wall of worry.

Consumers will need to collaborate to change how the pie is cut.

Platts Aluminum Symposium

Thank You!