Nonferrous

COPPER ON THE REBOUND?

Moving into spring, signs indicate that the copper scrap market is enjoying a rebirth. Price and demand have blossomed during the past several months. Strong buying by Chinese brokers and consumers has led the way to a recovery.

Prices around mid-April topped the $2-per-pound range, a level not seen since price and demand cratered this past fall. Some reports have copper prices up by nearly 50 percent from the beginning of the year.

London Metal Exchange (LME) prices for other nonferrous metals also have rallied. Nickel is up 8 percent this year, while zinc is up by 30 percent, and lead is up 56 percent since the beginning of 2009.

In fact, even moribund aluminum has shown modest upward movement, with prices on the LME increasing by 2.1 percent since the beginning of April.

The increase in price has been driven by some surprising strength in demand from China. This has worked to reduce inventory levels, both in China and at the London Metal Exchange warehouses. According to reports, Chinese imports of refined copper could reach 300,000 metric tons.

The recent stimulus package put together by the Chinese government is expected to boost infrastructure investments, which ultimately will mean increased demand for copper for wiring and other applications.

Although prices have perked up, Chinese demand has increased competition for material generated in North America. One source notes that Chinese companies are outbidding many domestic scrap dealers for unchopped copper wire. Being priced out of the market puts pressure on domestic consumers, who are left with less material from which to select.

The improvement in copper scrap prices relates to the sharp decline in supply as well. When prices declined, many scrap dealers saw a significant decrease in the supply of material. Now, with copper demand increasing, many scrap dealers are finding themselves short of material. Even with the higher prices, a number of scrap dealers report a fairly significant decrease in the generation of material.

While copper has been one of the key beneficiaries of China’s recent buying habits, several other nonferrous metals are reportedly seeing a pop in demand from offshore buyers. Aluminum and nickel, both metals that have languished on the domestic market, have experienced a bit of an uptick related to offshore buying, principally from China.

Some vendors in the Midwest also are presented with the challenge of getting containers for export shipments. One Midwestern dealer of nonferrous scrap says containers are tough to come by. Another source notes that container availability was not much of an issue until early April, when a jump in Chinese orders soaked up much of the available supply.

While export markets have been fueling a mini-renaissance for nonferrous scrap processors, domestic consumers have had less of an upbeat outlook. With the U.S. economy still struggling, manufacturing has declined, leaving many consumers with less demand for what they produce.