Nonferrous Markets Show Strength

The mood was upbeat at the Nonferrous Committee meeting during the annual spring convention of the Bureau of International Recycling, Brussels, held in Istanbul, Turkey, May 26 through 28. Reporting on markets in Asia and the Pacific Rim, John Crabb of Simsmetal Ltd., North Sydney, Australia, said that in the world of nonferrous metals trading, the last year was the very eventful.

"Despite some dramatic price fluctuations on terminal markets, we have seen growth in physical demand for many of the base metals driven by continued strong economic growth in the United States, along with China and other major Asian economies," said Crabb.

On the copper side, the long-awaited increase in supply has yet to materialize and the relatively strong world consumption, led by the U.S., has easily absorbed all available material, he said. But despite good demand, the threat of increased copper production continued to overhang some markets.

"Asian demand for copper scrap has been, and continues to be, strong," said Crabb. "Demand from China has been consistent this year and pricing has generally been competitive. Similarly, there have also been good demand and prices for brass grades in this country. But there is weaker import demand for higher grades of copper and brass in Japan and Korea due to currency realignments."

Aluminum prices have risen recently, even as LME stocks have increased, and demand appears to have improved as U.S. economy continues to prosper. Alcan estimates that worldwide demand for aluminum grew at a 10 percent annual rate in the first quarter of the year.

"Demand for aluminum has been and continues to be strong throughout the Asia Pacific region," said Crabb. "Demand for extrusion scrap into South China has been decreasing as the supply of competitive Russian ingot is now readily available in large quantities. Secondary smelter capacity is being increased in South China, Malaysia and Thailand."

There is substantial economic activity in India, according to Ashwini Singhal of Singhal Commodities, Bombay, India, as a number of economic reforms have been implemented, including removal of restrictions on overseas investments and the rationalizing of import duties. There are also more privately-owned ventures than there were in the past.

Copper in India is experiencing a huge demand/supply gap, said Singhal. But significant new capacity is being added, so by 2005 the situation will likely reverse and there will be more exports of copper from India as opposed to imports. There will also be more zinc production. Currently, the country is producing surplus aluminum.

On the downside, says Singhal, although industry leaders in India are fully aware that recycling scrap metal is economically advisable, the country is experiencing some problems due to Basel Convention restrictions.

The Middle East nonferrous market is also benefiting from the generally healthy world economic picture, according to Salam Sharif of Sharif Metals Ltd., Sharjah, United Arab Emirates. Gulf countries and Egypt are making rapid strides towards development, he said. A construction boom is boosting these economies and is supporting the metals market.

"The prospects for 1997 appear relatively positive for the nonferrous metals market," said Sharif. "The metals should be well positioned to benefit from a combination of higher economic-led demand growth, and a renewed surge of investment funds entering the sector."

In the U.S., the nickel/stainless steel scrap market reflects a very healthy stainless steel production level, according to Barry Hunter, senior vice president of Keywell L.L.C., Baltimore. Total U.S. production of stainless grades in 1996, including 400 series, was approximately 2.1 million tons, he said. These figures are expected to increase between 3.5 percent and 6 percent in 1997.

"How much scrap is there to assist that production level?’ asked Hunter. "Using a conservative yearly export figure of 250,000 tons, I calculate a total of approximately 800,000 tons of processed austenitic scrap potentially available to U.S. producers. We are unlikely to go beyond that unless the U.S. scrap price is competitive to imported scrap."

There could be potential late this year for a market correction in the form of destocking, and profits are poor, he said.

If the status quo remains, according to Hunter, there could be an inventory build up of finished product, which would tend to increase discounts and profitability and would eventually reduce production. "However, should European and Asian economies improve, I feel potential consumption in the states could support a 6 percent increase in production, thereby maintaining high scrap utilization, and hopefully decent business," he said.