Good news for nonferrous markets

Positive economic news is helping to boost nonferrous scrap markets. The Institute of Supply Management (ISM) reports that its manufacturing index stood at 54.7 in December, reflecting continued expansion of the manufacturing base. The ISM also notes that aluminum, brass, copper, nickel and stainless steel each posted price increases in December, while the London Metal Exchange (LME) shows significant upward price swings for copper, nickel, aluminum, tin, lead and zinc since January 2016.

Additionally, construction spending reached a cycle high in November, and consumer confidence is at its highest level since August 2001, according to Timothy Hayes, an analyst with Lawrence Capital Management, Richmond, Virginia.

The improved outlook is not limited to the United States; the economies of Europe and China also are improving.

After a strong climb in pricing, especially through the fourth quarter of last year, some of these gains have been given back. Part of the reason is that while economic conditions are improved, prices have “gotten ahead of the fundamentals,” one source says.

Copper could be one of the bigger gainers during the first half of the year. Supply is a concern as labor issues and limited new mining capacity could swing what recently was expected to be surplus for the metal toward a deficit.

At the same time, demand for the red metal appears to be increasing. Ed Meir, an analyst with International FCStone, says the multinational financial firm Barclays has raised its forecast for global copper demand in 2017 from 2 percent to 3 percent, adding that disruptions could tighten the supply on the global market. (See “Better Days Ahead,” starting on P. 38, for more on copper.)

Aluminum has received much attention as of late. Recently, the U.S. Trade Representative has filed a complaint with the World Trade Organization (WTO) alleging that China subsidizes certain producers of primary aluminum.

The Aluminum Association, Washington, reports that imports of aluminum ingot, scrap and mill products into the United States and Canada in November 2016 increased by 73 percent relative to November 2015.

Meanwhile, U.S. exports of aluminum ingot, scrap and mill products in November dropped by 1.4 percent relative to November of the previous year. In fact, total scrap exports for the month dropped by 14.2 percent.

According to The Aluminum Association, for the first 11 months of 2016, imports of aluminum products were up 31 percent, while exports of those same items were down 3 percent.

Nickel pricing is becoming more volatile in response to the Indonesian government rescinding its policy restricting the export of low-grade nickel ore deposits.

Throughout the past year, nickel prices have increased steadily, climbing from $8,400 per metric ton in early January 2016 to $11,700 per metric ton in early December, according to the LME.

The International Nickel Study Group (INSG), Lisbon, Portugal, says nickel usage will continue to grow in 2016 and 2017 in light of the increase in production of the austenitic stainless steel grades in all main markets.