Nonferrous Department

Rough Seas for Some Exports

Even when the rest of Asia was in its darkest economic days, China could be counted on to absorb a certain amount of scrap metal. But calling China a steady market might not be considered accurate, since the enigmatic ways of the government are just as unpredictable as anything capitalism can offer.

Currently, new import duties are affecting the Chinese market for scrap, which may have already been weakening. “The market in China is weak,” says one nonferrous export broker. “They’re not paying the prices that are needed or ordering the large quantities.”

The broker notes that the Chinese government “increased the import duties about four weeks ago,” and that the new system does not necessarily favor shippers. “They changed their system regarding scrap metals. You used to report the actual weight and value of each container. Now they have decided to have a standard weight for 20-foot containers and another for 40-foot containers, regardless of what grade of metal is in there.”

The system falsely inflates the value of some shipments, the broker notes, since China imports mostly low grades of nonferrous scrap, but the new standards are based on high-grade scrap values.

Over time, the broker expects adjustments to be made for the new import structures. “Gradually, it will settle in. There is still production and demand.”

What shipments there have been to Asia over the last nine months have benefited from extremely low freight rates. “The price tumbled in the second half of last year,” notes the nonferrous export broker, “and they have not recovered—not a bit.” She says that trans-oceanic shippers “tried to implement a freight increase with what they called a Panama Canal surcharge,” but that the pricing increase didn’t stick.

The bargain situation for shippers may be about to come to an end however, due to an uptick in some Asian economies and a consolidation trend within the ocean freight industry.

This summer, Denmark’s A.P. Moller-Maersk line announced that it had agreed to acquire Sea-Land Service Inc.’s international liner business including vessels, containers, related container terminals and certain lease obligations from CSX Corp., Jacksonville, Fla. The deal would bring together two of the largest containerized freight shippers.

“More mergers will probably follow, as everyone else tries to reposition themselves,” says the broker. What remains to be seen is whether the expected consolidation will give the remaining shipping companies a greater ability to enact rate increases.

IMCO RECYCLING SIGNS SUPPLY DEAL

IMCO Recycling Inc., Irving, Texas, has signed a 10-year contract to supply secondary aluminum to a rolling mill owned by Commonwealth Industries. The company estimates that some 1.5 million tons of aluminum will be supplied to Commonwealth under the contract.

The secondary aluminum will be produced at IMCO’s Uhrichsville, Ohio, facility, located adjacent to the Commonwealth rolling mill. IMCO is planning an $8.5 million expansion project that includes two new furnace installations to increase its capacity at the plant. Combined with prior improvements to the plant, the company will be raising the Uhrichsville facility’s rated annual capacity from 360 million to 600 million pounds.

The plant improvements “will allow Commonwealth Industries to maximize the productivity of a new continuous aluminum caster and other upgraded equipment that it has recently installed at its rolling mill,” says IMCO chairman and CEO Don V. Ingram.