At a crossroads

Several sources say nonferrous scrap markets are almost as difficult now as they were during the recession that began in late 2008, when prices for most metals plummeted and end markets practically disappeared overnight. Now, however, markets have ground downward over time, as have margins.

One Texas-based scrap metal recycler says, “There isn’t one company in the scrap metal industry right now making any money with nonferrous metals.” The statement may be hyperbolic, but it illustrates that scrap metal dealers are encountering tremendous difficulties.

The outlook has grown gloomier throughout the first quarter of 2015. Some sources said markets would recover somewhat after China’s Lunar New Year, which was celebrated in February.

However, this sentiment has ebbed. As the dominant player in many nonferrous metals, China’s continued economic difficulties have put downward pressure on these metals.

Copper, more than any other metal, has felt the full weight of China’s economic problems. The country controls roughly 40 percent of the global copper refining business.

According to the Shanghai Metal Market, China imported 306,500 metric tons of copper scrap in January 2015, a decline of more than 16 percent from the same time last year.

The situation in China also has been exacerbated by stricter CCIC (China Certification and Inspection Group) inspections for shipments into the country. Several sources say these inspections recently have intensified, making scrap dealers more reticent about shipping overseas.

The problems with exports are exacerbated by the backlog of orders at West Coast ports. Several Midwestern recyclers that routinely ship nonferrous scrap overseas from West Coast ports have been scrambling to find alternate homes for their material in light of the difficulties they have experienced in getting space on vessels.

Domestically, markets for most nonferrous metals are stabilizing, though consumers are more selective with their purchases, sources say.
 

Aluminum scrap may hold great long-term promises, but in the short term the metal is feeling downward pressure. Secondary aluminum producers on the domestic market have ample inventory and are not aggressively buying.

China continues to add aluminum production capacity, which is challenging the industry. According to a Bloomberg article, over the first two months of 2015, China’s aluminum production increased by 21 percent to 6.9 million metric tons from the same time in 2014. Additionally, China’s exports of aluminum products during the same period jumped 80 percent to 860,000 tons.

One of the world’s largest aluminum producers, Alcoa, with headquarters in Pittsburgh and New York, continues to examine its production capacity. In early March, the company announced plans to review its aluminum smelting and refining capacity for possible curtailment or divestiture. The potential actions could affect 14 percent of Alcoa’s global smelting capacity and 16 percent of its global refining capacity. Currently, the company has idled 19 percent, or 665,000 metric tons, of its smelting capacity and 7 percent, or 1.2 million metric tons, of its global refining capacity.