Summer Slumber

A barrage of bleak economic news has dampened enthusiasm about a potential rally in nonferrous metals prices this summer. However, several optimistic scrap dealers say they see signs of hope for this fall.

In the short term, several scrap metal recyclers say markets may trend toward the downside because of a number of factors outside of North America. Concern over the shaky European market has spooked many recyclers. Several sources say they have reduced their exposure to that market because of economic concerns that started in Greece and have spread to Spain, Italy and even France.

The Chinese economy continues to slow, adding to the short-term negative outlook for nonferrous scrap markets.

A recent Reuters report notes that China’s largest aluminum-producing province, Henan, idled approximately 700,000 metric tons of aluminum production in the past several months. Reuters adds that the reduction could reach 1.2 million metric tons by the end of the 2012, which is roughly 25 percent of the province’s total capacity, before aluminum stabilizes.

The problem with aluminum is not limited to China; several of the world’s largest aluminum producers have announced plans to take capacity offline. Norsk Hydro recently announced plans to shutter one of its aluminum smelters in Australia. The company’s Kurri Kurri smelter produces roughly 120,000 metric tons of aluminum per year.

Another large aluminum producer, Russia’s Rusal, says it is mulling plans to sharply curtail aluminum production. Rusal is reportedly considering idling from 300,000 to 600,000 metric tons of high-cost smelting capacity beginning in the second half of 2012 in an effort to regain balance in the aluminum industry.

U.S. aluminum smelters are doing fairly well, though dealers continue to report that prices for most grades of aluminum scrap are on the soft side. Movement has been fair, though several scrap dealers say consumers are not as aggressively purchasing material.

Copper markets have been unsteady as of late in light of concern about Europe’s economy. Prices have slumped during the past several months. Further, several sources say they expect to see little improvement this summer.

Some scrap dealers in the United States are expressing modest optimism. Despite all the headwinds buffeting global nonferrous markets, the overall trend has been toward moderately improving markets for aluminum and copper scrap, they say.

One source says that copper and, to a lesser degree, aluminum, may be entering into over-sold territory and could see a bit of a bounce as basic fundamentals become clearer and markets respond to improved domestic demand.

A Texas scrap metal recycler says that after a pause in July and August, buying may pick up a bit through the rest of the year. “It is a bit confusing right now. Prices aren’t bad, and the numbers are reasonable historically,” he adds.

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