Steady but unspectacular

The brass scrap market in the first two-thirds of 2016 has mirrored the challenges inherent throughout the metals recycling sector this year: diminished scrap flows coupled with pricing well below peaks seen earlier in the decade.

The combination is a difficult one for scrap processors, traders and (in some ways) brass scrap consumers alike. Recyclers and traders are competing aggressively for the smaller volume of scrap, compressing their margins. Consumers, meanwhile, may prefer the lower price points, but they can find themselves scrambling to obtain enough scrap to keep their furnaces fed.

Recyclers, traders and metals producers throughout the brass scrap supply chain seem to not expect dramatic changes in a positive direction for brass scrap, relative either to pricing or global demand. Ideally, the end of the modest recovery in the United States or any dramatic slowdown in China’s economy will not bring additional troubles.

Honey of a problem

Brass scrap comes in a variety of grades, as defined by the Institute of Scrap Recycling Industries (ISRI) “Scrap Specifications Circular.”

ISRI’s alphabetically sorted listing of “code names,” or trading names, for nonferrous scrap grades includes about two dozen, ranging from drink (refinery brass) to pales (brass condenser tubes), that are predominantly brass.

A smaller selection of these grades, however, are volume leaders, including ebony (red brass scrap, including valves), grape (cocks and faucets) and honey (yellow brass scrap, including castings, rod and tubing).

The supply of these grades, now that the exchange price of primary copper has fallen from highs of more than $4 per pound earlier this decade to the $2.10-per-pound range in mid-2016, has declined significantly at scrap facilities throughout North America (and in Europe and other parts of the world as well).

“Flows have been substantially diminished throughout 2016,” says Chris Greenfield of Federal Metal Co., Bedford, Ohio, regarding the ebony grade that his ingot making and nonferrous trading firm seeks to buy.

A representative from a scrap processing and trading firm based in the Great Lakes region, who requested anonymity, says the difficulties in the ebony and honey grades mirror the wider scrap market.

“This type of scrap is short—as is everything else,” the recycler says. “We are seeing more new production of brass scrap than obsolete scrap right now.”

It seems indisputable, however, that on one key front the brass industry is losing a battle. In the plumbing contractor sector, a steady source of scrap, years of market share gains made by polyvinyl chloride (PVC) and cross-linked polyethylene (PEX) plastic pipe makers are beginning to show.

“These grades are losing out to substitution in the form of PVC plumbing. Scrap flows for [pipe and faucet-related] grades are down 50 to 60 percent from five years ago,” says the recycler in the Great Lakes region. “A higher-priced market might pull out more units, but it will not get back to the levels we once saw.”

Howard Schamach, an executive vice president with GDB International Inc., New Brunswick, New Jersey, says the prevalence of PVC and PEX piping substitution produces effects on the supply and the demand sides.

“Copper [and brass] consumption in construction is decreasing since PEX piping has been introduced as cheaper and an easier product to use,” he comments.

Annual production volumes of finished brass in the U.S. spell out the material’s struggles against its plastic competitors in the construction sector. From 1994 to 2000, brass mills in the U.S. churned out from 3.36 million metric tons to 4.03 million metric tons of rod, tube and other products on an annual basis. From 2010 to 2014, however, those annual figures declined to a range of from 1.97 million metric tons to 2.09 million metric tons, according to figures in the New York-based Copper Development Association’s “Annual Data” booklet.

Makers of brass plumbing and hardware items have put considerable efforts into maintaining a presence in hardware stores and home décor showrooms, but they may be holding onto a niche versus retaking lost market share. “Brass usage would be considered as decorative metal in upscale building projects,” Schamach says.

Holding on to building products market share will remain critical for brass producers. Certain brass mills and a range of brass scrap grades pertaining to the munitions industry have a different end market in their sights, and they appear to be experiencing a better decade because of it.

Straight shooting

America’s gun owners are not only a force to be reckoned with at the ballot box, they also play a role in the demand for finished brass and the supply of brass scrap grades.

When ammunition-related items make news in the scrap industry, often it is because a live mortar or artillery shell has made it through the sorting and shipping process, which has led to a catastrophic explosion at a scrap yard or melt shop.

Beyond these unfortunate incidents, however, is a steady trade in small arms ammunition shells, the most desirable of which are made of brass alloys in the 70-percent-copper range.

The bullets fired at gun ranges throughout the U.S. often are manufactured domestically and encased in shells made at domestic brass mills.

Among the largest suppliers of ammunition to the U.S. military and to the outdoors and hobbyist market is Orbital ATK Inc., Dulles, Virginia.

Summarizing its first quarter 2016 financial results, the firm notes, “Orbital ATK manufactured over 400 million rounds of small-caliber, medium-caliber and large-caliber ammunition for domestic and international customers” during the three-month period.

Cartridge weights vary across the spectrum of ammunition used in hand guns and rifles, but if one uses 0.4 ounces as a rough average, those 400 million rounds could account for 10 million pounds, or 5,000 tons, of brass usage in a three-month span.

Although brass remains dominant in the sector, its competitors include shell casings made of lacquered and zinc-coated steel, aluminum and specialty polymers or composites.

For now, the munitions casings industry is a brass-dominant sector, which is reflected in ISRI’s designation of four brass scrap grades (lace, lady, lamb and lark) pertaining to fired or “mutilated” shells.

“There is a competitive market for shells today,” Goldberg says of these scrap grades. “Both the export market and the domestic market are pretty aggressive buyers.”

However, exporters of these grades do not have the entire world open to them, as they are not welcome in some countries.

Excitement unlikely

Economic indicators in the U.S. and in most of the world’s other large economies are not pointing to renewed demand for basic materials, including copper and brass.

Nonferrous scrap recyclers who have struggled to maintain healthy volumes of inbound material likely are hoping the construction sector in the U.S. remains steady enough to keep domestic brass mills as viable scrap buyers and construction sites generating at least baseline levels of scrap.

Recyclers say they are unconcerned about demand, whether domestic or export. “Demand has increased over past few years and is steady,” Schamach says.

As with other scrap metal grades, the hard work will be on the supply side.

The author is editor of Recycling Today and can be contacted at btaylor@gie.net.