NONFERROUS HOLDS ITS OWN
The nonferrous market continues to show some mixed signals, with scrap copper showing good movement and higher prices. Meanwhile, the aluminum scrap market, while still in a fairly decent position, is seeing some issues that are creating a murkier situation.
One of the biggest concerns is the softening auto industry. Because automakers are struggling to sell their finished products, orders for some grades of aluminum scrap to feed these needs are slowing. One aluminum scrap processor says that markets for aluminum could come off a bit as the auto industry struggles.
Reflecting the difficulties with the domestic auto industry, General Motors reported a loss for its most recent quarter. Further, the company reported a decline of around 6 percent in shipments of new automobiles over the first two months of this year.
The company also has announced plans to cut production of automobiles and trucks by more than 250,000 vehicles over the first six months of this year.
A slightly better outlook comes from another handler of aluminum scrap who says that while the domestic auto industry is struggling right now, it may be close to or at bottom.
Another area of interest for aluminum scrap recyclers is the labor unrest at Wabash Alloys’ Wabash, Ind., plant. The contract for some union workers at the plant has expired, and there has been some discussion about a possible strike at the plant. The company claims that it is the world’s largest producer of recycled aluminum casting alloys.
Although a disruption in operations at the plant could create some short-term issues, another processor says that if the plant is closed for an extended period, additional capacity could come online from other sources.
At the same time, the availability of aluminum scrap is somewhat muted. Despite some slowing in aluminum scrap demand, there is tightness in nonferrous scrap markets, which is making it more of a challenge for processors looking to obtain more tonnage.
Copper markets, overall, continue to show strength. Demand remains sturdy as China continues to play a very active role in the market. "China is very strong on all the red metals," a Midwestern scrap dealer says. China’s expected demand contributes to a forecast for continued strong markets through most of this year.
Offshore, China continues to be the dominant player in the market for many of these grades. Buying is expected to remain steady to strong from China, which should work to keep material flowing at a steady pace.
Despite some price slippage for a number of nonferrous grades, most scrap dealers say they are moving all the tonnage they are processing. While a few people concede that they are holding some material in anticipation of higher prices, for the most part, they are looking to ship material at present prices.
This trend is not just affecting nonferrous scrap processors in the United States. In a recent report from the Bureau of International Recycling, a trade association based in Brussels, prices remain high for most grades of nonferrous scrap, while inventory levels remain low.
However, forecasters also see some moderating of prices for many of these nonferrous grades as some economists speculate that the global economy may start to slow down a bit.
The big caveat, one that has been mentioned repeatedly over the past several quarters, is the growing impact that China is having on the nonferrous market. While there are no indications of any significant pullback in demand, as many processors have succinctly put it, "As China goes, so goes the market."
For copper, this is translating into stronger demand. According to market reports in mid-March, investors were speculating that China would be buying large blocks of copper to replenish stockpiles following a global shortfall of supply.
Further, according to a Bloomberg report, China’s State Reserve Bureau may buy more large blocks of copper in April to build up inventory levels.
(Additional news about nonferrous scrap, including breaking news and consuming industry reports, is available online at www.RecyclingToday.com.)
WISE METALS GROUP LLC ANNOUNCES FINANCIALS
Shipments of Wise Metals Group’s aluminum beverage can stock, other rolled aluminum products and scrap in the fourth quarter of 2004 totaled 166 million pounds, compared to 146.3 million for the same period in 2003, according to an announcement by company officials.
For all of 2004, shipments totaled 736.1 million pounds, compared to 605.2 million pounds for 2003, an increase of 22 percent. Net loss for the fourth quarter of 2004 was $25.2 million. This compares to net income of $1.8 million in the fourth quarter of 2003.
Adjusted earnings before interest and fees, taxes, depreciation and amortization (EBITDA) for Wise Recycling increased approximately 62 percent in the fourth quarter vs. the fourth quarter of 2003. For the full year, adjusted EBITDA also increased by approximately 49 percent to $3.6 million.
The company’s network of recycling centers generated a 47 percent increase in quarterly sales from the prior year, reflecting an increase in market pricing and an 18 percent increase in volumes handled through the Wise system.
"We are extremely pleased with our performance this year," says Wise Recycling Chief Financial Officer Jim Tierney. "We have managed our system of centers and our administrative side to take advantage of favorable market conditions without adding significantly to costs as volumes increase."
Wise Recycling continues to diversify from its roots as a used beverage container (UBC) collection network, Wise Recycling Vice President Gary Curtis says. "UBCs continue to be our largest single volume contributor, but we are seeking to become a one-stop shop for small and large recyclable scrap collectors," he says. "UBC volume represented roughly 30 percent of the volume through the Wise Recycling system in 2004, but volume growth over the prior year in that market was only 4 percent compared to more than 26 percent for other scrap types."
For the year, Wise Metals Group reported a net loss of $41.5 million. These results compare to a reported profit of $7.6 million for 2003.
Wise says that increased costs for transportation, material and supplies and continued high energy costs have offset gains achieved by productivity increases.
"Obviously our productivity increases cannot continue to offset the rapidly rising costs outside of our control, which is why we had our previously announced price increase," Wise Metals Group Executive Vice President and Chief Financial Officer Danny Mendelson says. "This price increase, including an annual price increase equal to a percentage increase of the PPI (Producer Price Index), is set to take place April 1. Accordingly, first quarter 2005 results will continue to be affected by these rising input costs, with margin improvement from our price increases expected in the second quarter of 2005," he says.
Wise Metals Group Chairman and CEO David D’Addario says, "As we head into 2005, I am enthusiastic about both our prospects in the can industry and the growth potential in the building and construction (B&C) and common alloy distributor markets." He adds, "The interest in these products has been very strong given the recent and continuing trends in both residential and commercial construction. Through our developing manufacturing practices and resulting efficiencies, we have generated additional capacity to now expand our presence in these markets."
Wise Metals Group’s newest subsidiary, Listerhill Total Maintenance Center (LTMC), continues to grow its customer base, D’Addario says. LTMC provides maintenance, repairs and fabrication to manufacturing and industrial plants.
KENTUCKY LANDS ALUMINUM PLANT
Kentucky Smelting Technology Inc. (KST), a joint venture between Toyota Tsusho America Inc. and its parent company Toyota Tsusho Corp., headquartered in Nagoya, Japan, is locating a new 50,000-square-foot aluminum smelting facility in Bourbon County, Ky.
The location of Kentucky Smelting Technology in Paris, Ky., will allow the company to work in partnership with CMC/CLA, a manufacturer of aluminum wheels.
"Our long-standing relationship with Toyota Tsusho ensures that Kentucky Smelting Technology will be a welcome addition to our community," Frank Bellafato, chairman and CEO of CMC/CLA, says. "KST will be performing a vital operation for CMC/CLA in providing molten aluminum for our casting operations. We are expecting to expand our production of aluminum wheels in September to 1.5 million per year. With KST providing the aluminum, CMC/CLA can focus our activities on our core business of casting and finishing aluminum wheels," Bellafato says.
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