Chugging Along

Moving deeper into the spring, processors generally are expressing optimism regarding most nonferrous metals. During the recently concluded Institute of Scrap Recycling Industries Inc. (ISRI) Convention & Exposition, attendees and speakers at a number of sessions expressed a moderately bullish, albeit cautious, outlook for aluminum, copper and nickel.

Several attendees said that they expected prices for most nonferrous metals to remain at their present levels or to climb a bit higher perhaps. The key factor influencing their expectations is the generally better global economy.

The aluminum market, several attendees observed, had been showing surprising resilience in recent months. This is despite indications that the global market has a surplus of finished aluminum. Stephen Moss of Stanton A. Moss, Bryn Mawr, Pa., a speaker at the Spotlight on Aluminum session, said that despite the oversupply, which was expected to continue for the next several quarters, demand and price are being forecast to remain strong.

Credit for the improved strength in the aluminum market has been aluminum’s use as an investment vehicle. This trend toward buying base metals as a hedge against a weaker U.S. dollar and overarching concerns about the global economy has led to sharply higher prices for a slew of metals, including aluminum.

During the session, speaker William Adams, FastMarkets Ltd., London, noted that aluminum demand continued to grow and that the metal has demonstrated strong market penetration during the past 10 years.

An East Coast scrap metal recycler concurs with the generally optimistic outlook for aluminum, saying that currently the overall scrap industry and aluminum in particular are strong and that the scrap supply is limited. “The monthly average for aluminum is holding up pretty well,” he says.

In contrast to the oversupply of finished aluminum on the world market, during the ISRI Convention’s Spotlight on Copper session, presenters spoke about the continued copper scrap shortage. Joe Pickard, chief economist and director of commodities for ISRI, Washington, D.C., said the predicted copper shortage amounted to 435,000 metric tons on the world market. This has led to prices of greater than $4 per pound throughout much of the past year.

While several copper dealers say they feel that copper prices could top $5 per pound in light of these continued shortages and aggressive buying from Chinese consumers, others say they are concerned that the price may decline if China starts to pull back on its orders significantly.

Several scrap dealers say the Chinese government’s effort to cool down its economy through fiscal tightening measures is having an impact on new purchases of copper scrap. While still volatile, prices toward the end of April were at the $4.25-per-pound level. This price, still fairly high in historical terms, is down from earlier in 2011, when the price topped $4.50.

According to recent press reports, in an effort to control overcapacity, the Chinese government has capped the annual output capacity growth rate for 10 types of nonferrous metals at an average of 8 percent during the next five years as part of China’s 12th Five-Year Plan.

Sentiment appears to be bullish for nickel as well, with speakers at the ISRI Spotlight on Nickel session saying they expected prices on the London Metal Exchange to strengthen through 2012. Similar to other metals, nickel is benefiting from the gradually improving world economy. Also fueling the bullish outlook for nickel alloys and stainless steel is their growing number of end markets. The metals often are used in alternative energy applications, including solar power and fuel cells.

With nickel and stainless prices quite strong, several dealers say substitution is taking place to take advantage of price differences between different grades of stainless steel.

While the overall fundamentals for nonferrous metals are pointing to stronger markets through the next several quarters, concerns and potential obstacles could derail the continued recovery. Leading the way is the general uncertainty concerning the U.S., and ultimately, the world economy. The slow recovery has not yet resulted in substantially better unemployment rates, which is dampening the surge in metals demand.

(More information on nonferrous metal markets, including consuming industry reports and breaking news, is available at

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.)