Nonferrous Department

With apologies to The Who, many handlers of nonferrous metals have been talkin’ ‘bout their generation, or more accurately the absolute lack of supply on hand, which is sustaining a relative strengthening of prices.

Economic problems, especially on the manufacturing side, continue to reduce the available supply of industrial scrap. With less scrap to be purchased, prices have increased.

Many nonferrous metals, notably copper, have been on quite a run through the second quarter. The bounce came after a steep and very painful fall during the fall of last year.

However, for copper, this climb is showing signs of petering out, at least in the short term, as prices moving seem to have crested as of mid-June and are easing back.

China had been buying copper scrap aggressively during the first half of this year. According to one report, from January to May, China purchased a total of 70 percent of the copper it bought during all of 2008.

A number of speakers at the Bureau of International Recycling (BIR) World Recycling Conference in late May said the Chinese market had bounced back more quickly than many other regions of the world following the market downturn.

Aluminum has been a more resilient as of late, with pricing heading upward.

Stainless steel and high-temp alloys have seen significant declines in production. One market report notes that stainless steel production—like steel production—showed a decline of nearly 30 percent in the last quarter of 2008, though the decline in Chinese production was far less. The forecast speculates that stainless steel production this year could be off by as much as 20 percent.

The drop in stainless production, as expected, has created a decline in stainless scrap generation. In the early months of 2009, availability of revert and new production scrap tumbled 40 percent and 25 percent, respectively, whereas old scrap availability plummeted a minimum of 60 percent, according to a speaker at the Word Recycling Conference.

Stainless scrap volumes are expected to slide from 7.4 million metric tons in 2008 to between 5.2 million and 5.8 million metric tons for the whole of 2009. Global stainless steel consumption is thought likely to fall 17 percent from 23.6 million metric tons last year to 19.6 million metric tons in 2009.

While Chinese buying has buoyed the market for a number of nonferrous metals (notably copper), buyers are purchasing more material than production actually demands, according to some sources. This could indicate Chinese buyers are stockpiling material and may scale back purchases this summer.

Several market watchers are citing different reasons for the downward slide. While there is a sense the economy is improving, albeit slightly, the overall economic condition is still fragile. And prices, which have shot up significantly during the past several months, have gone far higher than warranted, according to some sources. Now, some of these same industry observers say a retrenching of the price is likely.

An exporter notes that two recent policies/regulations are already having a major negative impact on export shipments to China. The first has been the doubling of the customs duty for shipments to Chinese ports, which is adding significant costs. The second policy, which could have an even greater impact on shippers, has been a change in policy whereby incoming containers cannot contain a mixture of materials.

The exporter notes that the policy, which China only recently has begun enforcing, is resulting in the hold up of many containers, with some containers being opened and emptied out at the port. He adds that a number of shipping lines now are refusing to accept containers of recyclables en route to China because of the new policy.