American Metal Market Methodology

The Process Behind Our Pricing

American Metal Market Methodology

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The Metal Bulletin Group aims to provide leading pricing intelligence, including independent industry benchmarks, for the metal and mining industry. The group’s global portfolio of news, analysis, conferences and insight services complement these price benchmarks.

Mission Statement

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The original metals price reporting agency since 1882 with more than 1200 proprietary price assessments in 25 regions across North America

Global price reporting agency with over 950 proprietary price assessments covering every major trade region

Research and consulting business providing a series of short-term and long-term forecasting services to our pricing

Brands

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Global price reporting network

The worlds largest dedicated metals price reporting team with offices in London, New York, Pittsburgh, Shanghai, Hong Kong, Sao Paulo, Melbourne, Singapore, Mumbai, CIS, Istanbul, and 5 other US locations.

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AMM as a price reporting agency

The Metal Bulletin Group, which includes American Metal Market, is a leading price reporting agency (PRA) and intelligence provider for the metal & mining markets. Our market reporters assess over 2000 non-ferrous, ferrous, raw material and non-metallic mineral prices, many of which are the industry standard benchmarks, trusted and used across the industry supply chain. Breadth and depth of metals and minerals expertise and coverage Impartial and independent PRA which engages with all sides of the market Highly developed skills and processes in assessing prices and calculating indices Independent and transparent methodologies and price specifications Unique systems and technology infrastructure to ensure data integrity Pricing practices aligned to core IOSCO principles Our assessments and indices are used by our clients for contract pricing and internal

applications The world’s major exchanges (e.g. SGX, CME) use our prices to settle financial contracts Under a data licence agreement we are able to supply our data as direct feeds (XML, API) or

via third-party vendors

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What is a price reporting agency?

A price reporting agency is an organization that provides services to the commodities markets by producing price assessments and indices for different commodities E.g. MB European Aluminium premium or AMM US MW Scrap indexesWhat is a price assessment? It’s a price that aims to be representative of a particular spot market during a particular time or window. E.g. AMM No. 1 Heavy Melt Chicago price aims to provide a

reliable, fair and independent representation of the average price heavy melt has transacted in the Chicago spot market during the previous month or since the previous assessment

Metal market participants look at our prices as a reference when they conduct business, in particular to negotiate contracts

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How do we assess prices?

Indexes: single number, a volume-weighted average of transaction data. Methodology generally employed in comparatively liquid market.

Assessments: the bulk of our prices; they can be a single number or a spread/range of reported representative business

Both methodologies aim to produce an independent and transparent price reference, representative of where the bulk of the SPOT market is at the time of assessment.

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The assessment methodology

Data Analysis Data Collection

Price Discovery Process

Greater weighting on transaction data, bid/offers, deals heard, market participants’ indication of value The context of a deal is

important. Assessments are peer-

reviewed.— Before an assessed

price is published in AMM it has been reviewed by no less than 2 members of editorial, including a senior member of the team.

Canvassing the market to collect data points – spot deals, bids/offers - from market sources. High quality PRA’s will

have a wider net of contacts from which to draw to collect data points.– AMM’s Code of

Conduct ensures integrity through this process

Data is analyzed, if required, normalized and outliers are removed. The AMM editorial team

acts as quality control for the data collection process.– AMM’s database

enables fully auditable analysis of data

Assessment Produced

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The assessment methodology

1. Market reporter collects market data, analyses and sets the price.

2. Market reporter peer reviews the data, notes and the set price. Approves or rejects, then sends the form for sign-off.

3. A senior member of the team reviews and signs off for publication.

The peer review and sign-off process ensure adherence to methodologies and rigor

Price Discovery Process

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The assessment methodology

Key questions that reporters ask to understand and analyze the context around a deal:

Data collection is more than simple data gathering – data collected must match our required price specifications.

What price? What volume? What material? What delivery terms? Any special terms? Who with?

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The index methodology

Once data points are normalized, two sub-indices are calculated.A preliminary index is calculated from the two sub-indices. Each sub-index is volume weighted.Two sub-indices; each tonnage weighted to balance market.

The final Index is the straight avg of the sub-indices.

Normalization coefficients created using historical data.

Outliers lying more than x% away from the mean price are excluded and the index calculated once more.

Final Published Index

Phone

Data Collection Model

Normalized Procedure

Buyers Sellers

Preliminary Index Figure

Buyers Sellers

Email

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How are AMM prices used?

Price Discov

ery

Price benchmar

ks for contracts

Internal sales &

purchasing

performance

evaluation

Market trend

analysis

Inventory valuation purposes

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Who Uses AMM Pricing?

ProcurementPurchase on AMM index

for raw materials

Ensure accuracy of

supplier prices

Understand price

volatility and material

availability

Sales

Use AMM prices to estimate

project costs in proposalsUnderstand drivers of

cost increases

Recognize opportunity

for new projects

Business Planning

Understand market

trends and detect

correlations

Maximize profits

Increase accuracy of project cost estimates

Finance

Inventory valuation

Create forecast models

Budgeting

OperationsAssess current market

conditions

Manage logistics and transportatio

nAccess to

global data for all

departments

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FLong-term contracts

Spot

Derivatives

Our objective when we assess the market is to produce prices representative of what happens in the spot market.

Spot markets influence the rest of the market despite being a fraction of the whole traded volume.

How does AMM serve the spot market?

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How does AMM serve the long-term contract market?

Assessed prices can be used to trigger escalation/de-escalation clauses in contracts to protect counterparties engaged in long-term contracts from market volatility.

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How do exchanges use our prices?

13th Jul

31st Oct

Spot price as assessed by AMM

Future contract

The price can be used by the exchange to settle the financial contracts

Convergence future price-spot price at maturity

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IOSCO Principles for Price Reporting Agencies

The Principles are best practices on:

Governance and oversight Quality and integrity of the

methodologies Accountability and Audit

What are the IOSCO Principles?

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How does AMM align with the IOSCO requirements?

A strong Code of Conduct, policies and reporter training to ensure we act with knowledge independence, impartiality and integrity.

All methodologies are published to ensure our price reporting process is fully transparent to stakeholders (subscribers, market participants and regulators)

All changes to methodology and/or price specification are implemented only after have sought and considered market participants views and feedback

A fully auditable process developed following the IOSCO requirements

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Ethical StandardsThe Metal Bulletin Group’s price reporters are required to abide by the company code of conduct that provides guidelines on important matters such as conflicts of interest, a gift and entertainment policy, personal account dealings, and pricing data confidentiality. Price reporters are also required to follow detailed methodologies and pricing procedures when assessing the market they cover.

For more details, please refer to the Metal Bulletin Group Code of Conduct and to the Methodologies published on our website.

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Complaint Policy

If you wish to raise an issue, there are several avenues through which to voice your concern:

Routine inquiries through the market reporter Escalation to an AMM Editor Escalation to corporate personnel via a formal

complaint – details of how to file a formal complaint are available on AMM.com/pricing/methodology

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Thank you and questions

We invite you to participate in the price discovery process by becoming a data submitter. Email [email protected] to ask for a copy of our data submitter policy.

For information about AMM licenses, please call 877-638-2856.