Pricing power

Will 2017 be the year nonferrous metals markets show solid improvements?

For many scrap dealers, signs point to modest improvements over the first quarter of 2017 at least. However, even the most bullish of scrap dealers are hedging their optimism.

While prices have improved, some sources say they are not seeing many of the fundamental improvements that warrant a more robust outlook.

The lack of obsolete and industrial generation in most parts of the country continues to be a drag on markets.

An East Coast scrap dealer describes the market in late 2016 as “interesting.” While the market isn’t robust, he says the moderately higher copper scrap prices are drawing out more obsolete material, though not enough to make up for the lack of material over the past several quarters.

Another broker adds that since late fall, copper scrap prices “have shot up.” However, he questions whether the uptick has staying power. “Is it the beginning of a trend or just a bump up before we see another downturn?”

The upswing in copper prices can be attributed partially to end-of-year buying from some secondary consumers. One source says that as of early December, copper prices have risen by between 20 percent to 30 percent, only to see some retrenching as a number of consumers balked at the higher prices. Despite the modest dip toward the end of 2016, as of early December copper prices had reached an 18-month high after falling to a six-year low in January 2016.

In the Midwest, several sources say the continued lack of available wire is reducing operations at their wire chopping systems. One scrap dealer says China continues to play an outsized role in the copper wire business in the Midwest, resulting in wire chopping lines in parts of the Midwest being “underutilized.”

The Midwest-based scrap processor says that when copper scrap markets saw an appreciable price improvement recently, China had entered the market aggressively, buying material that was previously being consumed by domestic sources.

The outlook among aluminum scrap dealers appears to be less optimistic in the short term, with one dealer saying, “Secondary aluminum is not doing that great right now. Supply continues to be a problem for many scrap dealers.”

Zinc and lead continue to be the biggest gainers among nonferrous metals in terms of pricing. The lack of supply caused by significant production cuts by many of the largest zinc mining firms is the biggest reason for the surge in zinc scrap prices through most of 2016.