A flight to safety

Despite the modest downturn in nonferrous metals markets at the end of 2014, it looks like some of these metals could see an uptick in price and demand through the first part of 2015. The U.S. economy continues to strengthen, which has kept the flow of material decent. Prices, while not robust, have stabilized.

Pricing for most nonferrous metals has settled down after a somewhat volatile second half of 2014. Several sources say most nonferrous metals are trading in a fairly narrow range, though a growing number of scrap dealers say they are seeing gradual improvements.

Aluminum markets continue to show promise in the short and long term. The auto industry’s growing interest in aluminum is encouraging.

One factor buoying optimism is the strengthening U.S. manufacturing base. Supporting this outlook, the Institute for Supply Management’s (ISM’s) manufacturing purchasing managers’ index continues to remain above 50, indicating expansion in the manufacturing sector. The November 2014 ISM marks the 18 consecutive month of growth in the manufacturing sector.

The improvement in manufacturing is boosting generation of new scrap and domestic demand for scrap metal.

With aluminum improving on the domestic front, aluminum premiums are increasing. One Midwestern source says that as of the middle of December, Midwest aluminum premiums are close to an all-time high of 24 cents per pound.

One source says that over the next year he is “cautiously optimistic.” He says, although prices seem to be moving in a narrower band, there isn’t much of a problem finding end markets for most nonferrous scrap metals. With a tighter U.S. market, a catalyst such as a jump in exports to a particular region could push prices higher.

The same can’t be said for copper. A catalyst for the red metal is not visible as of late. China will continue to play the biggest factor in the direction of the metal. Little positive economic news is coming out of China. An interest rate reduction that the Chinese central government announced in late 2014 gave copper and many of the other base metals a short price spike. However, after the modest run up, prices reverted.

For U.S. scrap dealers, the supply of copper offers better news. With Chinese consumers not as aggressive in purchasing, U.S. scrap dealers say they are able to get enough copper to meet their needs. Copper wire has become more plentiful over the past quarter, one source points out.

Another nonferrous scrap processor says that while he is able to get plenty of copper wire because of the lack of interest on the part of Chinese buyers, copper prices likely will not break out to the upside.

In fact, another source says that while copper presently is at a stable price, it saw a fairly pronounced price decline in the fourth quarter of 2014, partly in light of China exiting the market.

Despite the currently gloomy copper market, some rays of light may be on the horizon. A surplus of copper that has been dragging on the world market may dissipate in 2015.

Glencore, the third largest copper producer in the world, says it expects to see a significant copper deficit in 2015, with Chinese demand and mining disruptions creating a deficit of up to 1.8 million metric tons of copper.

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