Spotlight on Aluminum 2006 ISRI National Convention

1
Spotlight on Aluminum2006 ISRI National
Convention

• Challenges and Opportunities in Scrap
• Gary Curtis
• Wise Recycling LLC

2
Company Overview

• Wise Metals Group LLC operates a
  state-of-the-art, cost-efficient aluminum
  processing mill (Alloys)
• one of only five mills owned by three companies
  in the country that produce beverage can stock
• nearly 100 acres under roof
• purchased from Reynolds in 1999 after acquisition
  by Alcoa was blocked by the DOJ
• Wise uses recycled scrap rather than primary
  aluminum as its principle raw material feedstock
• Third largest beverage can stock producer in the
  world
• Wise operates an aluminum scrap recycling
  business (Recycling) which provides a cost
  effective source of feedstock for Wises internal
  consumption

3
World Class Facility Listerhill

• Most cost-efficient can stock processor of scrap
• Significant capital improvements
• approximately 670 millionsince 1986
• Advanced casting technology
• 1.8 billion pounds of casting capacity
• 1.4 billion pounds of hot mill capacity with
  multiple finishing mills and coating facilities
• State-of-the-art coating plant for applying
  specialized coatings
• One of only three mills in North America capable
  of hot rolling 104-inch wide sheet

Listerhill facility has nearly 100 acres under
roof
4
Opportunities For Consumers

• Wider Spreads

5
Price Comparison UBC vs. P1020 (in cents per
pound)
Spreads
Jan-03 0.12
Dec-05 0.27
Jun-04 0.19
Source Platts, and UBC Prices Prior to December,
2003 found in Container Recycling published in
Resource Recycling
6
Price Comparison UBC vs. P1020 (as a of P1020
Price)
Jan-03 82.30
Dec-05 74.42
Jun-04 77.27
Source Platts, and UBC Prices Prior to December,
2003 found in Container Recycling published in
Resource Recycling
7
Price Comparison 6063 vs. P1020 (in cents per
pound)
Spreads
Jan-03 0.03
Dec-05 0.07
Jun-04 0.04
Source Platts
8
Price Comparison 6063 vs. P1020 (as a of
P1020 Price)
Jan-03 95.08
Dec-05 93.03
Jun-04 95.64
Source Platts
9
Price Comparison Mill Grade MLCs vs. P1020 (as
a of P1020 Price)
Spreads
Jan-03 0.12
Dec-05 0.30
Jun-04 0.18
Source Platts
10
Price Comparison Mill Grade MLCs vs. P1020 (as
a of P1020 Price)
Jan-03 82.50
Dec-05 71.89
Jun-04 78.11
Source Platts
11
Price Comparison Smelter MLCs vs. P1020 (as a
of P1020 Price)
Spreads
Jan-03 0.14
Dec-05 0.40
Jun-04 0.25
Source Platts
12
Price Comparison Smelter MLCs vs. P1020 (as a
of P1020 Price)
Jan-03 79.43
Dec-05 62.75
Jun-04 69.49
Source Platts
13
Price Comparison Old Cast vs. P1020 (as a of
P1020 Price)
Spreads
Jan-03 0.16
Dec-05 0.44
Jun-04 0.33
Source Platts
14
Price Comparison Old Cast vs. P1020 (as a of
P1020 Price)
Jan-03 76.53
Dec-05 58.90
Jun-04 60.88
Source Platts
15
Price Comparison Old Sheet vs. P1020 (as a of
P1020 Price)
Spreads
Jan-03 0.17
Dec-05 0.45
Jun-04 0.34
Source Platts
16
Price Comparison Old Sheet vs. P1020 (as a of
P1020 Price)
Jan-03 75.04
Dec-05 58.02
Jun-04 59.68
Source Platts
17
Spread Changes vs. P1020 Jan-03 to Dec-05
Jan-03 Jun-04 Dec-05
UBCs 0.12 0.19 0.27
6063 0.03 0.04 0.07
Mill MLCs 0.12 0.18 0.30
Smelter MLCs 0.14 0.25 0.40
Old Cast 0.16 0.33 0.44
Old Sheet 0.17 0.34 0.45
Source Platts
18
Price Changes as a of P1020 Jan-03 to Dec-05
Jan-03 Jun-04 Dec-05
UBCs 82.30 77.27 74.42
6063 95.08 95.64 93.03
Mill MLCs 82.50 78.11 71.89
Smelter MLCs 79.43 69.49 62.75
Old Cast 76.53 60.88 58.90
Old Sheet 75.04 59.68 58.02
Source Platts
19
Prices
Source Platts
20
Opportunities For Consumers

• Wider Spreads
• Availability of Scrap
• Increase in the Number of Long Term Contracts
• Quality Improvements
• Freight Synergies

21
Opportunities For Processors

• Increased Margins
• Increase in Volume of Material
• Ability to Sell Material to New Markets
• Freight Synergies

22
Challenges for Consumers

• Increased Working Capital Needs

23
Challenges For Consumers

• A Simple Equation
• January 2003
• 1 Copper .72/lb.
• x40,000 lbs
• 28,800
• December 2005
• 1 Copper 2.10/lb.
• x40,000 lbs
• 84,000
• March 2006
• 1 Copper 2.40/lb
• x40,000 lbs
• 96,000

24
Challenges For Consumers

• Increased Working Capital Needs
• Increased Freight Costs

25
Rail Fuel Surcharges
Source Norfolk Southern
26
Diesel Prices
Source Department of Transportation
27
Challenges For Consumers

• Increased Working Capital Needs
• Increased Freight Costs
• Increased Energy Costs

28
P1020 vs. Natural Gas Price Changes
Between 1/03 to 1/06 P1020 Prices Increased
68.63 Natural Gas Increased 129.17
Source Summit Energy and Platts
29
UBC Prices vs. Natural Gas Price Changes
Between 1/03 to 1/06 UBC Prices Increased
57.04 Natural Gas Increased 129.17
Source Summit Energy and Platts
30
Challenges For Consumers

• Increased Working Capital Needs
• Increased Freight Costs
• Increased Energy Costs
• New Buyers in the Market
• Consolidation of Processors

31
Challenges For Processors

• Increased Working Capital Needs
• Increased Freight Costs
• Increased Energy Costs
• Consolidation of Consumers

32

• Aleris
• Commonwealth
• Barmet
• Imco
• Alcan Shelbyville
• Alchem
• Metal mark
• Kaiser Bedford
• Metal Resources
• US Zinc
• Rock Creek
• Alsco
• Alumitech
• Corrus

• Wabash
• US Reduction
• Roth
• Alcan Quelph
• Reynolds Bellwood
• Alcan Shelbyville
• Alchem
• Metal Mark
• Kaiser Bedford
• Metal Resources
• US Zinc
• Rock Creek
• Culp