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Nonferrous

The domestic manufacturing base appears to be improving, increasing generation of new supplies of production scrap and reversing one of the chief concerns many scrap dealers have struggled with over the past several years.

November 11, 2014

If the mood at the recent Institute of Scrap Recycling Industries (ISRI) Commodity Roundtable, held in Chicago in mid-September, is any indication, for the next several months most nonferrous scrap metals will see fairly challenging markets. Roundtable attendees almost universally conveyed a downbeat outlook for the pricing of all nonferrous scrap metals as geopolitical tensions, along with slumping economies in Europe and Asia, have put downward pressure on prices.

Although the overall outlook was pessimistic, rays of hope were visible, almost all of them coming from the reasonably healthy U.S. economy. According to most economists, U.S. gross domestic product is solidly growing. This matches the view shared by many of the event’s attendees, who said the domestic market has been one of the lifesavers for their businesses. While most of these sources say the growth of the U.S. economy remains slower than desired, almost all agree it is strengthening.

Domestic manufacturing appears to be improving, increasing the generation of new supplies of production scrap and reversing one of the chief concerns many scrap dealers have struggled with over the past several years.

A particular bright spot within the U.S. economy has been the pace of auto sales. This sector has been a key factor in the recent optimism surrounding aluminum scrap, as well as for a number of other nonferrous metals to a lesser degree.

Even aluminun pricing, however, has been trending downward this fall following a recent industrial production report that shows weaker U.S. numbers as well as the Federal Reserve’s signals that it will continue to taper quantitative easing.

Prices continue to edge downward for most nonferrous metals, with many sources saying they don’t believe a near-term catalyst is present that could turn around price and demand.
 


Stainless steel scrap has been struggling mightily as of late. Reflecting the weakness in this area, nickel prices at the end of September were down about 20 percent from their two-year high, reached only this past May. Also, despite the ban on the export of ores from Indonesia, nickel stocks have increased by about 37 percent, adding to the overall tough outlook for the metal.

Several sources say China’s manufacturing sector is slumping as internal consumption slows. With China’s economy slowing, demand for most grades of nonferrous scrap that are used to produce finished products has decreased.

Exacerbating the problems in China is the outlook for Western Europe. This region is the largest end market for many finished products from China. With a number of European countries dipping back into recession, the flow of products from China to Europe has declined. This has created a domino effect, with Chinese manufacturers cutting their production.

Copper also has been experiencing many of the same problems. Shipments of copper scrap to China have fallen significantly. One large copper scrap exporter says much of China’s GDP is dependent on real estate, therefore the slowdown in the real estate market is having a direct impact on copper demand in the country.

Three-month copper prices on the London Metal Exchange declined by 4.5 percent in September, the largest decline since the first quarter of 2014.

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