ISRI Commodities Roundtable: Copper on the Edge

Speakers say challenging markets for copper will continue.

October 1, 2013
Recycling Today Staff
Conferences & Events Nonferrous
The overall consensus from speakers and attendees of the recently concluded ISRI (Institute of Scrap Recycling Industries Inc.) Commodities Forum is that copper will continue to see challenging markets going forward.
In opening remarks, Chris Greenfield, vice president of Federal Metals, a Cleveland-based copper and brass ingot maker, acknowledged the challenging market for copper. “I have never seen the market so on edge right now. In Orlando, (during the ISRI national convention) business owners were dealing with one, two or three quarters of malaise, which was mostly affecting big companies.”

However, difficult markets continue with little signs of the economy turning around. Companies are now enduring three, four or five straight quarters of tough markets, he added.

During the 2013 Commodities Roundtable Forum, hosted by Washington, D.C.-based ISRI in Chicago Sept. 16-18, panelists looked at the difficult markets as well as some of the drivers that could strengthen copper and copper scrap markets going forward.

In his remarks, Greenfield noted, “The questions are more complex now and it is harder to get the answer.”

“Where did all the metal go?” he then asked.

In their roundtable discussions, three speakers—Jason Schenker, founder of Prestige Economics; Mark Weintraub with Cleveland-based Premier Metal Services; and Marcus Kartenbeck with the large European-based copper scrap recycler Aurubis AG—looked at the recent past as well as at the market for copper over the next several quarters.

Schenker put a moderately positive spin on the overall market, noting modest global growth presently. “When we think about what’s going on in the global economy, we are getting rich slowly.”

He ticked off five drivers that will dictate the market, both for copper as well as for the overall recycling industry: 
  • Modest global growth – Schenker noted that growth is taking place on a global basis, though it is slow at the present . The growth will be driven by banks that are “implementing accommodative policies,” he said. While that will help with purchases, he added that it is likely there will be more inflation cooked into the market.
  • Expectations for purchasing managers’ indices –  “It looks like in the second quarter we bottomed out and are now moving higher.” It won’t be a consistent improvement, Schenker noted. “There will be slight pullbacks.”
  • A more accommodative Federal Reserve policy  – “The Fed is doing things to stimulate growth,” Schenker said. These include buying mortgage-backed securities and treasury bonds to the tune of $85 billion per month.
  • The dollar –  While the dollar has been moving in a narrower range over the past few months, Schenker said “the dollar will go lower. There are positives that people like to talk about. There is too much optimism. There are major risks, including large federal debts.”
  • Inventory levels – Schenker said there is a large supply overhang on the market. Adding to that was the “cratering” of the Chinese economy, he said, with growth in that country being only OK.
  • As for copper outlook, which shows a modest improvement, though “still quite muted,” Schenker said. “Things look okay, but not great.”

Taking a different tack, Weintraub focused much of his attention on the role that copper ETFs (exchange trade funds) play on the copper markets. Weintraub noted that over the past several years, including his time as an attorney, he has been monitoring and providing commentary for proposed copper ETFs, which a number of financial houses were looking to launch.

Weintraub expressed concern over the growing role that banks, through ETFs, are playing on the copper market. He noted that some financial houses not only own the metals but also the warehouses and the transportation mechanisms; they are collecting the rent on the material and they even become involved in trading the metals for clients and customers, he said.

The third speaker, Aurubis’ Kartenbeck, said that while the European economy has struggled greatly over the past several years, Europe’s economy is showing modest improvements. 
Kartenbeck provided a look at Aurubis’ operations, which he noted, make the company the largest copper scrap consumer in the world. 
Another factor that is growing in interest, Kartenbeck pointed out, is the push for higher quality material being delivered.