Metal Watch

COPPER WILL SETTLE AT LOWER PRICES

After spiking up to $1.30 per pound last May, copper prices plummeted to 82 cents in June following news that a trader for the Japanese company Sumitomo had hidden more than $1.8 billion in copper losses over 10 years. "There was a 35 percent change in six weeks," said Rick Hirsch, vice president of metals for Deutsche Sharps Pixley Metals Inc., New York, speaking at the Institute of Scrap Recycling Industries’ Copper Roundtable in Chicago this past September.

Currently, leading economic indicators such as housing starts and consumer confidence are up, and employment is down, but prices for copper are still down. "Western world consumption is up from last year, yet prices are dropping," said Hirsch. "There’s been a wave of mine supplies from Asia, South America, and the U.S. coming up – maybe this explains the disparity between supply and demand. Copper stocks are just at four weeks’ consumption, but the price has collapsed."

However, the coexistence of falling prices and falling inventories can’t persist, he said – one has to change. "I don’t know what the price will be one year from now, but there is value when copper is at 90 cents," said Hirsch.

FERROUS DEMAND TO REMAIN FIRM; STEEL EXPORTS KEY

The consensus at last month’s Ferrous Roundtable in Pittsburgh, sponsored by the Institute of Scrap Recycling Industries, Washington, is that the ferrous scrap market will continue to remain firm due to continued strong demand for finished steel. However, there were some areas of concern and uncertainty. Those areas include the continued availability of scrap substitutes, such as direct reduced iron, and the ability of the United States economy to absorb the additional steel capacity that will be coming on line in the years ahead.

"All major end user markets for steel are up – autos, appliances and construction," said Richard Stauffer, vice president of purchasing for North Star Steel, Minneapolis. "We expect strong demand to continue through 1997." He warned, though, that if too much capacity comes on line too fast, rising inventories could squeeze prices and result in slim profit margins.

Stauffer also warned that there could be more pig iron coming in from Russia and other countries, which will lessen the potential for a scrap shortage. John Mike, president of Simsmetal America, Richmond, Calif., agreed that new production of DRI and other scrap substitutes will offset the increase in steel capacity. "I just do not see a scrap gap on the horizon," he said.

In terms of demand, U.S. mills need to form better partnerships with customers overseas, said Michael Gambardella, managing director of J.P. Morgan & Co., New York. "The U.S. market will not be able to absorb the new capacity even though it imports a lot of steel," he said. "There is more to the dynamics of that equation than simply replacing one for the other. A lot of the new capacity is going to have to focus on exports, and mills need to make better relationships overseas instead of simply trying to dump their product when there is an overcapacity situation."

STAINLESS, NICKEL MARKET CONTINUES ON GROWTH CURVE

Engineered applications of stainless steel has grown faster than any plastic application during the last 10 to 20 years, according to John Reid, executive director of Queensland Nickel Pty., Ltd., Australia, who spoke at the Nickel, Stainless Steel and Specialty Metals Roundtable held last month in Pittsburgh by the Institute of Scrap Recycling Industries, Washington. Worldwide, Reid said that Taiwan is still the biggest consumer of stainless steel, while growth in production will occur in South Korea, Italy and Taiwan.

Prices should also trend upward, possibly reaching $5.50 a pound by 1998, then falling back to $3.25 a pound by the year 2000, said Reid. The downward trend in pricing will reflect new mined nickel entering the market after the turn of the century.

Currently, prices are down from about $4 a pound in the $3.20-pound range. One reason for the lackluster price is that stainless volume is currently off, said Arthur Aronson, president of chief executive officer of Allegheny Ludlum Corp., Brackenridge, Pa. Plus, European and Asia stainless is flooding the market, and stainless steel producers kept producing despite a lack of market demand.

However, Stan Jalbert, vice president and general manager of Sammi Resources, Ontario, Canada, said that the imbalance in the market should not last long as stainless steel is becoming popular in many construction projects.