Slowing to a Crawl

The best way to describe markets for nonferrous metals as the end of the summer approaches is listless. Price, demand, orders, shipments and generation for most nonferrous metals continue to decline. Few scrap metal recyclers say they see positive developments emerging for the rest of the year. The tone, to put it mildly, is bearish.

The sharp decline in orders from Chinese consumers has been a considerable challenge. With demand from the largest consumer of many nonferrous scrap metals declining, a number of exporters are redirecting tonnage to domestic sources. One exporter says that pricing from China for many nonferrous scrap metals has fallen so low that pricing is better in the U.S.

In addition, several scrap metal exporters say it is becoming more difficult to unload shipments at ports in China. A scrap metal recycler who deals in a range of nonferrous metals and electronic scrap says many ports in China prohibit the mixing of metals in a shipment. He says this is an effort by the Chinese government to boost tax receipts for the materials.

With most economic indicators pointing downward, many scrap dealers are expressing significant concern over the steady decline in available supply. In early August, many scrap dealers say they are having a difficult time getting material across their scales. For many dealers, dwindling supply is a trend that seems to be accelerating in recent months.

“Volumes are way down at many yards,” one East Coast-based scrap dealer says. “Street trade has been falling quite sharply as of late.”

Not only has generation fallen, another scrap dealer says, but demand, especially for aluminum scrap, also has softened.

A nonferrous scrap metal broker says he is concerned about the relative health of the scrap metal dealer network. “I am getting really nervous, not so much about the market, but I am getting nervous about dealers,” he says.

With margins being squeezed, many dealers are operating at a loss. He says some dealers are unable to cover their fixed costs with the amount of material coming across their scales.

Aluminum scrap seems to be the hardest hit of the nonferrous metals, according to sources. Prices for finished aluminum have tumbled significantly from earlier this year as of early August. In response, several aluminum producers have announced plans to close capacity to eliminate excess supply, reducing their scrap intake.

A Midwestern scrap recycler says secondary aluminum prices continue to decline as a result of the softening in demand from scrap consuming operations.

“There are not a lot of positives happening in the business right now,” he says, adding that secondary smelters “are buying enough, and they seem to be getting what they need.”

Copper scrap, which is enjoying better demand than aluminum scrap, continues to see price volatility. One source says copper for delivery in September on the Comex is priced in the neighborhood of $3.37 per pound.

Despite the price volatility, he adds that he isn’t having much difficulty moving the material.

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