Welcome to the… ISM – New York Commodity Corner First Quarter 2015 Report It is our intent to provide you with historic commodity pricing information, define trends, discuss forecasts, and most of all, to help develop insights regarding materials pricing. Commodities will be updated each calendar quarter, or as the specific need arises. We hope you find this information useful and we are open to suggestions and questions to make this more relevant to your needs. Please send your questions and comments to: info@ismnewyork.org Crude Oil & Natural Gas 15.00 150.00 145.00 140.00 135.00 130.00 125.00 120.00 115.00 110.00 105.00 100.00 95.00 90.00 85.00 80.00 75.00 70.00 65.00 60.00 55.00 50.00 45.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 Natural Gas ($ / MM BTU) 13.00 11.00 9.00 7.00 5.00 3.00 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 1.00 WTI ($ / barrel) West Texas Oil vs NYMEX Natural Gas ($ / MM btu) Natural Gas WTI Crude Oil – Cost Drivers: World-wide supply and demand balance, gasoline refining conditions in the US, regional/geopolitical instability and issues, commodity investment/speculation, global and local weather, OPEC statements and actions. Current Pricing Summary: 1Q2014 @ $98.66/bbl 4Q2014 @ $73.04/bbl 1Q2015 @ $48.91/bbl (a decrease of 33% from prior calendar quarter and a 50.4% decrease calendar period to period) FY2011 @ $94.54/bbl FY2012 @ $94.21/bbl FY2013 @ $98.01/bbl FY2014 @ $93.01/bbl Estimated FY 2015 @ $52.29/bbl (an estimated 43.8% year on year projected decrease) Natural Gas – Cost Drivers: Natural Gas is largely a domestic natural resource. Cost drivers are supply / demand, weather, and to some extent, sympathetic movement to oil, in particular given its recent volatility. Current Pricing Summary: 1Q2014 @ $4.95/MMBtu 4Q2014 @ $4.05/MMBtu 1Q2015 @ $2.98/MMBtu (a decrease of 26.4% from prior calendar quarter and a 39.8% decrease calendar period to period) FY2011 @ $4.05/MMBtu FY2012 @ $2.79/MMBtu FY2013 @ $3.66/MMBtu FY2014 @ $4.44/MMBtu Estimated FY2015 @ $2.65/MMBtu (an estimated 40.3% year on year decrease) ISM - N.Y. Commodity Index 10.50 9.50 Index 8.50 7.50 6.50 5.50 4.50 3.50 2.50 1.50 0.50 Linerboard HDPE Edible Tallow Crude Oil Ethylene PET Ethylene Where Used: About 70% of North America’s ethylene production is derived from natural gas (30% from crude oil). Ethylene is the building block for a variety of the plastics we use daily, as well as solvents, surfactants, and other significant chemical feedstocks. Cost Drivers: Although tied to natural gas and oil costs, ethylene is also subject to supply / demand swings, and in particular to the operating efficiency of the production facilities. Downstream end products (plastics, solvents, glycols, etc) can compete for the available pounds of ethylene, thus driving ethylene pricing. Current Summary: 1Q2014 @ $.483/lb 4Q2014 @ $.448/lb 1Q2015 @ $.348/lb (a 22.3% decrease from prior calendar quarter and a 28% decrease calendar period to period) FY2011 @ $.543/lb FY2012 @ $.483/lb FY2013 @ $.467/lb FY2014 @ $.480/lb Estimated FY2015 @ $.352/lb (a projected 26.7% year on year decrease) Ethylene market “somewhat” in balance, with near term projections basically flat to $.01/lb movement. An additional “incremental” ethylene cracker construction has been announced, for mid - 2018 startup; bringing the total new ethylene units under construction in the US to 7. HDPE Where Used: High density polyethylene is used in a wide variety of applications, including plastic milk containers, liquid detergent bottles, etc., and industrial applications such as plastic pipe for natural gas transmission and many automotive parts. Cost Drivers: High density polyethylene is heavily influenced by the factors driving ethylene costs, and it also has its own supply / demand cost influences. Current Summary: 1Q2014 @ $.842/lb 4Q2014 @ $.852/lb 1Q2015 @ $.742/lb (a 12.9% decrease from prior calendar quarter and a 11.9% decrease calendar period to period) FY2011 @ $.708/lb FY2012 @ $.688/lb FY2013 @ $.77/lb FY2014 @ $.853/lb Estimated FY2015 @ $.739/lb (a projected 13.4% decrease year on year) HDPE prices remain unchanged over the last several months; near term swings (if any) would be in an approximate $.05/lb band. Globally, HDPE resin markets have begun to “tighten”, specifically in Europe and Asia; North America continues to suffer some logistical challenges in the Gulf and West Coast. Industry operating rate for April at 92.1%, and days of supply decreased by 3 days, down to 26.5. PET Where Used: This is the plastic used to make soda bottles, water bottles and plastic beer bottles, and is also used in the manufacture of carpeting and clothing. Cost Drivers: PET pricing is tied to ethylene glycol and to xylene markets, supply / demand balances, and it has historically had a seasonal influence (increased consumption during the summer due to water and soda bottle demand). Current Summary: 1Q2014 @ $.818/lb 4Q2014 @ $.72/lb 1Q2015 @ $.623/lb (a 13.5% decrease from prior calendar quarter and a 23.8% decrease calendar period to period) FY2011 @ $.961/lb FY2012 @ $.906/lb FY2013 @ $.876/lb FY2014 @ $.79/lb Estimated FY2015 @ $.653/lb (a projected 17.3% year on year decrease) Historically, this summary has been based on the “mid-size” buyer price index, which has been discontinued in favor of a new “large buyer” formula and market based index Near term pricing is expected to rise based on anti-dumping regulation (still pending), increased PTA feedstock costs, off-line capacity due to a plant explosion in China and overall lower inventories (water bottle season). Glycerine Where Used: Glycerine is used in cosmetics, foods, pharmaceuticals, and a variety of personal care and oral care products, as well as in other applications including animal feed, antifreeze and certain energy uses. Cost Drivers: As glycerine is a byproduct of the production of other products, its cost is principally driven by the demand for glycerine for its various uses – the supply remains driven largely by the production of other products such as biodiesel fuels, soaps, fatty alcohols, and fatty acids. Over the past few years the increasing use of biodiesel as a fuel in Europe, and increasing volumes in North America, has resulted in significant increases in the supply of byproduct glycerine globally, which will help drive the glycerine markets. Current Summary: USA 99.7% Kosher quality refined glycerine spot pricing: March 2015 @ $.45/lb End 2015 estimated at $.50/lb Europe 99.7% Kosher quality refined glycerine spot pricing: March 2015 @ EUR 530/pmt End 2015 estimated at EUR 600/pmt USA 99.5% technical quality refined glycerine spot price: March 2015 @ $.36/lb End 2015 estimated at $.39/lb Europe 99.5% technical quality refined glycerine spot price: March 2015 @ EUR 450/pmt End 2015 estimated at EUR 480/pmt USA 80% crude glycerine spot price for refining: March 2015 @ $.10/lb End 2015 estimated at $.12/lb Europe 80% crude glycerine spot price for refining: March 2015 @ EUR 275/pmt End 2015 estimated at EUR 330/pmt Estimates based on 1 Euro Dollar = $1.12 US Glycerine pricing recovered from the low reached mid Q4, 2014, increasing through the back half of Q4 and into Q1, 2015. Strong demand for refined glycerine accelerating from China. Inventories in US are declining; the strength of the US economy will be a clear driver of global glycerine markets. Linerboard Where Used: Linerboard is the main component and cost driver in the manufacture of corrugated shipping containers, which are used in a broad variety of consumer industries such as food and beverage, as well as the automotive industry. Cost Drivers: Linerboard is heavily influenced by supply / demand balances, inventories, conversion cost (energy), exports and industry consolidation. Current Summary: 1Q2014 @ $770/tn list price 4Q2014 @ $770/tn list price 1Q2015 @ $770/tn list price (flat from prior calendar quarter and from calendar period to period) FY2011 @ $670/tn list price FY2012 @ $687/tn list price FY2013 @ $758/tn list price FY2014 @ $770/tn list price Estimated FY2015 @ $770/tn list price (flat year on year) Consumption for containerboard is up .3% on an annualized basis vs Q4, 2014. Consumption is forecast to grow 1 – 2% for both calendar years 2015 and 2016.