An Upbeat Outlook

While the economies of the U.S. and China are pointing upward, Europe continues to be plagued with debt issues. The mixed fortunes of these economies could mute a full-scale recovery in nonferrous metals, though markets for many nonferrous metals seemed primed for an improvement in 2012.

Copper prices tumbled through the second half of last year, but the market appears to be rebounding thanks to improved demand from Chinese buyers and steady buying from U.S. sources. A Bloomberg News report noted that refined copper imports in December in China gained for the first time in four months, as smelters increased production amid greater raw material supply. This pickup in demand will likely strengthen pricing for copper scrap from the United States.

Furthermore, China has indicated that it is allowing the country’s five largest banks to increase first-quarter lending, and the country is weighing a plan to relax capital requirements as its economic growth cools. These steps likely will result in growing imports of many scrap metals.

China’s import of copper scrap climbed to an all-time high in December 2011. The increase has been attributed to the need to build up inventories in advance of Chinese New Year. Meanwhile, investment bank Barclays Capital says global copper demand will stabilize early in 2012, allowing for a price recovery by the middle of the year.

Aluminum prices, which also dropped sharply in the second half of 2011, have stabilized. However, analysts are not enthusiastic that prices will rally through the first quarter of the year. Prices spiked upward in early April of 2011, only to slowly give back much of that gain toward the end of 2011. However several speakers at the recently concluded Platts Aluminum Symposium said that despite last year’s drop, prices were still higher at the end of 2011 than they were at the beginning.

While there is growing optimism for aluminum in the longer term, short-term challenges remain, including a difficult U.S. housing market and Europe’s sovereign debt problems. Pricing for aluminum and other nonferrous metals could improve given the sense that the drop in pricing in the third and fourth quarters of 2011 may have been exaggerated, meaning an upward correction is imminent. Also buoying secondary aluminum markets has been the strengthening U.S. economy, which has kept the movement of aluminum scrap steady.

The transportation sector, a key end market, also has rebounded during the past several months. A healthier U.S. auto industry is generating greater optimism among many aluminum parts suppliers. This encouraging news is leading to improved aluminum scrap demand from secondary aluminum smelters.

According to the Federal Reserve’s Summary of Commentary on Current Economic Conditions, new auto sales were reported to have picked up in most districts of the country. The summary also notes that domestic manufacturing activity continues to expand.

Although markets for most nonferrous metals are solid, the continued volatility in prices, as well the murky global economy, are resulting in scrap dealers keeping little inventory on hand.
 

(More information on nonferrous metal markets, including consuming industry reports and breaking news, is available at www.RecyclingToday.com.)