Copper brightens as aluminum dims

While many scrap recyclers at the Institute of Scrap Recycling Industries Inc. (ISRI) 2015 Convention & Exposition, held in April in Vancouver, British Columbia, were bearish regarding nonferrous scrap markets, it appears some nonferrous metals are showing tentative signs of recovery.

Copper scrap markets may be poised to strengthen over the next several months. Prices have taken two steps forward and one step backward over the past month. These modest improvements follow a multiyear low for copper reached earlier this year.

A key factor improving copper scrap markets is the Chinese central government’s work to strengthen the country’s economy. As the largest consumer of copper scrap, price and demand for the red metal are greatly influenced by China’s economy. China’s central government has introduced a raft of stimulus programs that have generated enthusiasm from scrap dealers.

The economy of the eurozone, an area that also consumes a significant amount of copper scrap, is improving modestly as well, which could lend strength to the metal.

Copper mining companies are more aggressively reducing oversupply on the global market, balancing supply and demand.

Aluminum markets may have peaked in the short term and could soften moving into summer. While a number of large aluminum producers in North America and Europe removed some of their excess capacity in the last year in an attempt to balance supply and demand, China’s aluminum production continues to grow.

Reflecting the bearish outlook for aluminum, Cyprus-based Rusal, one of the world’s largest aluminum producers, says that during the first quarter of 2015 the average London Metal Exchange aluminum price declined 8.5 percent from the first quarter of the prior year.

A recent commentary Jesus Villegas, vice president of aluminum analysis for Harbor Aluminum, Austin, Texas, provided to the Aluminum Association, Arlington, Virginia, states that during the first quarter of the year, despite difficult weather conditions, aluminum scrap prices didn’t climb and “ample quantities were available.”

He continues, “Now that we are in the heart of the second quarter, while the flow of obsolete scrap is slowing, stamping, primary clips and aluminum chips are still being generated at a healthy pace, and the rolling sector is operating at full capacity.”
 

In addition, a substantial amount of imported coil is arriving to the United States, which means less finished coil is being domestically produced, Villegas says. Consequently, domestic demand for these segregated grades has lessened, and scrap spreads are at historic highs.

Stainless steel production could continue to improve throughout 2015, albeit at a slow pace, according to some analysts. The most recent forecast from the U.K.-based steel consulting firm MEPS finds that while stainless steel production in the United States increased by more than 16 percent to more than 2.3 million metric tons in 2014 compared with the previous year, in 2015 stainless steel production is forecast to grow more moderately, reaching an expected level of 2.4 million metric tons.