Aluminum Regains Its Footing

Markets for nonferrous metals remain volatile at the start of the summer, though it appears the bias is toward the upside. Nickel and stainless steel markets, however, are among the few exceptions. As of mid-June, several sources say signs point to a pullback in price and demand for nickel and stainless markets.

An Ohio-based scrap metal dealer says stainless scrap markets have softened. The overall weak economy is a primary factor behind the decline. In response to the softer markets, a number of stainless steel producers have shuttered excess capacity during the last several months, he adds. According to a report by Reuters, several European stainless steel producers are cutting stainless production by as much as 50 percent to bring finished stainless steel supply in line with demand for the metal.

Additionally, the Midwestern scrap metal recycler says stainless steel producers have been sending inconsistent signals to the market with price swings for their finished metals.

With the exception of stainless steel scrap, movement for most nonferrous metals has been fairly stable to good and the supply of incoming scrap material is improving. End markets have been challenging lately, with China, the main consumer of copper, nickel and stainless, sending out mixed signals regarding short-term demand.

Aluminum markets are improving. A lot of aluminum scrap is available on the market, and a scrap dealer based in the Midwest says sales are becoming a bit more challenging. “You can get all the material [you want] but you don’t want to sell it too early due to the potential of better pricing,” he says.

The scrap dealer says several aluminum suppliers are sitting on loads of scrap expecting price increases. “Companies that have the space and capital are taking advantage of the situation to make an extra buck,” he adds. Despite this tactic, several aluminum scrap dealers say movement and supply are gradually improving.

Copper markets are less certain. China’s role in the market through the summer and into the fall remains unknown. A scrap metal recycler based in the Western United States says China is coming back into the market for various grades of copper scrap. “Right now No. 1 copper is tight, while No. No. 2 copper is easier to get,” he adds.

Macro-economic issues continue to play a key role in copper markets. While a slow economy has reduced the overall demand for the red metal, a softer U.S. dollar is benefitting domestic exporters of copper scrap.

Bloomberg News is reporting that copper consumers in China are tapping into stockpiles, thus reducing orders for finished copper in that nation. A state-owned research company has estimated that the stockpile situation may cause copper imports to fall by nearly one-third in 2011, according to Bloomberg News.

(The copper market also was also a topic of discussion at the Bureau of International Recycling convention. See the feature story “Travel Rewards” starting on p. 80.)

Another factor that may point to a healthier copper market in the near term is the drop in inventories at warehouses in China. Several industry reports note that, after cresting earlier this year, warehoused supplies of copper have declined significantly. This could result in a pickup in orders from Chinese buyers.

Since peaking in early February, copper prices have been trending downward. However, as of mid-June, dealers say they think most grades of copper are reaching a floor price, and modest optimism is helping to boost the movement of red metals. From the high-water mark of slightly more than $4.50 per pound, copper dropped to less than $4 per pound this spring. Lately, the price has been moving at slightly more than $4 per pound, and market observers say they anticipate strengthening at that level.

Further complicating copper markets is the philosophy of some scrap generators, who have decided to hold on to their scrap material in anticipation of pricing at the $4.50-per-pound level.

“We haven’t seen a total recovery, but things have quickly gotten quite better,” the scrap dealer says of copper markets.