Uneasy feeling

Nonferrous markets continue to struggle with lack of scrap generation, and some sources say they are wondering if this is “the new normal.”

Moving into the summer, few signs are visible that a rebound in nonferrous market conditions will take place. In fact, several sources seem to feel conditions are ripe for a slide.

One source notes a lack of “phone calls” from people looking to sell material.

“We probably have had half as many calls now as we did last year,” he continues. “We aren’t really having any problems moving aluminum, although prices are definitely not where we would like for them to be.”

Prices for copper and aluminum have been trending upward in fits and starts since early in 2016, when copper fell to the $2-per-pound range and primary aluminum was selling for roughly 66 cents per pound.

Along with the lack of supply, another recycler says the light metal’s markets are flat and scrap consumers are becoming choosier regarding the scrap they are buying. “Consumers want high-quality scrap. Nobody wants lower-value scrap,” he remarks.

“In a nutshell, nobody is thriving,” he adds.

Several sources say they are hearing of more yards closing because of lack of business.

Another scrap dealer handling aluminum expresses concern that the auto industry is primed for a “correction.” This sector has helped to prop up demand for many metals.

“I am hearing about more subprime loans for cars defaulting,” he remarks.

“We aren’t really having any problems moving aluminum, although prices are definitely not where we would like for them to be.” – an aluminum scrap dealer

U.S. auto industry sales declined by 6 percent in May, though a number of automobile analysts have said the month offered two fewer selling days than April did. Several analysts, however, say they still feel 2016 will be a record year for U.S. auto sales.

The fairly robust housing sector also has given analysts a reason for optimism. Recent figures from the United States Commerce Department show that startups of single-family homes in April increased by 6.6 percent to a seasonally adjusted annual pace of 1.17 million units.

Despite these positives, the feelings being expressed by scrap yard operators are more bearish in nature. An aluminum scrap consumer, for instance, echoed many of the less-than-cheery sentiments. “Aluminum looks stagnant right now, and it may go down.” He adds. “There certainly is a correction going on right now. A big factor is the strong dollar.”

Exacerbating these challenges, another source says more secondary aluminum is being imported into the United States from Europe because of the strong U.S. dollar.

Supporting these claims, the Arlington, Virginia-based Aluminum Association reports that aluminum imports of ingot, scrap and mill products into the United States and Canada (excluding cross-border trade) totaled 695 million pounds in April 2016, an increase of 14.5 percent from the same time last year.

On the other side of the ledger, however, scrap accounted for roughly 46 percent of reported aluminum exports in April, with exports totaling 490 million pounds, which is 6 percent less than one year ago.