Cautious optimism

Departments - Nonferrous

Nonferrous scrap dealers express cautious optimism.

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April 13, 2017
*Average monthly settlement price, cash buyer; U.S. dollars per metric ton. Source: London Metal Exchange, www.lme.com.

Moving into the spring, nonferrous scrap metal dealers are expressing optimism. Some lingering pockets of uncertainty remain, but it appears most recyclers feel the upward trend in pricing, demand and general market conditions seen since the fourth quarter of last year will continue through much of the spring.

Copper prices have increased by nearly 25 percent from October 2016 through early March of this year. However, they retreated a bit as of mid-March, though several industry sources say there isn’t much concern over the short-term price of the metal as scrap dealers have been able to maintain spreads.

Several sources say higher-than-expected copper stocks, especially in China, could be influencing pricing. According to multiple reports, despite labor disruptions at several copper mines, the Shanghai Futures Exchange reported copper inventories in early March of nearly 320,000 metric tons, the highest level since April 2016.

A Reuters article quotes Robin Bhar, head of metals research for Societe Generale, a multinational banking and financial services firm based in Paris, as saying, “These stock increases are spooking the market, but maybe they’re reading too much into it, thinking it reflects slowing demand in China or the Asian region.

“There’s always a fairly slow start to most years; the first quarter is pretty weak, and then we have a strong second quarter, and I don't see anything to change that pattern,” Bhar says in the Reuters article.

In addition to the pullback in pricing, several sources say some consumers are pushing back deliveries of copper shipments because of a lack of near-term orders.

“Something has to give,” one source says regarding the contradiction of higher copper scrap prices and buyers delaying scrap shipments.

Another dealer says some brass mills are buying more scrap only when they have orders. Despite this, he says he feels the general sense of the market is that prices should remain stable, with generation of new scrap improving steadily.

“Zurik might be flagged because it looks a little bit trashier.” – an export broker speculates about China’s Operation “National Sword”

“I think all metal scrap dealers are happy right now,” one exporter says. “Markets are good, and there is reasonable demand for the material. These are good times.”

China’s recently implemented Operation “National Sword,” which seeks to crack down on shipments of solid waste into that country, is a source of concern for some scrap dealers. While China has not targeted scrap metal shipments for inspection, several exporters say they are concerned the scope of inspections could be widened to include nonferrous metals.

A broker for a large export firm speculates, “Zurik might be flagged because it looks a little bit trashier.”

Despite some rallying in aluminum markets, several dealers say they are cautious going forward. “Parts of the aluminum market are good,” one larger aluminum broker notes. “But it does depend on the type of aluminum being sought.”

A dealer based in the South says, “On the domestic secondary market, there has been a significant run up in 380 aluminum prices. Consumers are very aggressive with prices. And there is room to continue.”