The Netherlands, Europe -- Anton van Genuchten, Reukema Recycling
The Netherlands, Europe - Boris Bronneberg, Source Montan Handels
The Netherlands - Johan van Peperzeel
North America - Steve Solomon, Solomon Metal Corp.
China - Eric Deng, Ling Tong Metal
Western Europe, Italy - Fernando Duranti, Leghe & Metalli
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Nonferrous Scrap>>The Netherlands, Europe>>Anton van Genuchten, Reukema Recycling
(The following comments by Mr. Anton van Genuchten were made in late February and reflect the market at that time)
The flow of nonferrous metals has been modest during the winter months. The extreme weather in Europe during the winter, including snow and frost, has hampered much of the building industry, as well as collection from scrap peddlers.
The demand from both European and offshore buyers has held steady during the first month. Meanwhile, the slowdown in export shipments due to Chinese New Year appears to have begun earlier and lasted longer than usual.
Despite a modest slowdown in nonferrous shipments to China, overall export activity has remained stable during the first quarter of this year. There also appears to be solid demand from inland European consumers.
In the nonferrous market, stainless steel scrap demand has recovered and has been one of the strongest grades. In fact, I see demand for all nonferrous metals remaining strong. There does not appear to be any laggards at the present time.
One challenge in the European nonferrous market has been the sharp increase in freight prices, as well as container availability, which continues to tighten. Anton van Genuchten can be contacted at AntonvanGenuchten@reukema.com
NONFERROUS SCRAP>>THE NETHERLANDS, EUROPE>>Boris Bronneberg, Source Montan Handels
In Europe, the markets are pretty strong and the prices are pretty high. Demand isn’t huge but the Chinese have shown more demand than we expected coming out of the Chinese New Year. There is an expected low right now, but we expected the Chinese New Year to cause some quiet in the market. I do not expect it to last spectacularly long.
I actually think the Chinese New Year is overrated. It is nothing much more than our own New Year. Between Christmas and New Year’s we have 10 days vacation and they have two weeks. It’s not as important as people make it out to be.
I think the general demand from China is better than it has been over the last few months. Demand from India, though it is a bit weak at the moment, is still strong compared with the last year and a half. Local demand is pretty good for most items now. Obviously there will always be some commodities that are in somewhat lesser demand as is the case with copper at the moment. Our copper refineries are pretty full.
To be very honest, the margins are good but the volumes are bad. In total it’s enough to make a living, but it’s nothing to be excessively happy about and it’s definitely nothing to be disappointed about.
I cannot recall a winter as long as this one has been. We have snow right now, which for the time of year is nothing spectacular as we could have snow as late as May over here. But we haven’t had two or three days without snow since Christmas, which for the European locations close to the North Sea is extraordinary.
It’s normal to have two or three days of snow and then two weeks without, but we have had frosts for more than two months. If you go more toward the center of Europe, it gets colder and colder. It really is a long frost spell, which is causing the building industry to slow down more and more.
A friend of mine does work in the construction industry, inside of newly built houses. He had to stop working because inside the new houses, which obviously are not heated yet because they were just built, the cement was freezing. Usually with a couple of blowers you can work it out, but right now you can’t; it’s too much. The weather is slowing everything down and holding everything up. I think that’s the biggest reason that there isn’t a huge flow of material at the moment.
There is little building activity and little demolition activity. Obviously the whole worldwide financial situation isn’t contributing to huge amounts of projects, but we have had that for more than 18 months. That’s nothing new. But adding on top of that, now that it has been so cold, it’s just adding to the slow down.
The margins themselves on material, they have become better. There is still a fight between a couple of exporters and a couple of big companies, but that will never change. Your average margin improved to a degree that with the lower volumes it is good enough to cover your costs and make a living, but it is nothing to be spectacularly happy about. If the volumes pick up, one could make a very, very comfortable living at the moment.
I think industrial production will be improving as the weather improves over here. That’s obviously not the only factor that influences industry.
The automobile industry will slow down a bit more. It’s really simple. In Germany, the car dismantling scheme is finished. In Holland, it will last until the end of this year and then it will be done too.
But the incentive here hasn’t really been that big so it hasn’t been that attractive for people to bring their cars into that recycling scheme anyway.
There seems to be a bit of a higher demand for smaller vehicles in the market. That is just something that is coming from that car take-back scheme and that is going to die down. You can see that orders from suppliers in the car industry are already slowing down.
Boris Bronneberg can be contacted at boris@source-montan.de.
NONFERROUS SCRAP>>NETHERLANDS >> Johan van Peperzeel
The zinc and lead markets are more or less facing the same struggle at the moment. If you look at one month ago, let’s say the end of 2009, everyone was positive about the zinc market for 2010. But now we are one month further and at the end of January, there is a new situation, with zinc especially. Due to the hedge funds, the market was positive last year.
But now, the credit facilities of the Chinese Bank have reduced the credit availability to all companies. This means that the growth of the economy was too quick and now the economy is growing at a normal level, around 8% or 9%, but not above 12%, which is what it was during the last quarter of 2009. So the Chinese Bank has reduced credit availability and therefore, buying is more difficult.
When you look at China itself, it has 1.3 million tons of zinc ingots in warehouses. This is really something. They want to slow the growth and that is the main cause of the LME price for zinc being reduced €200 to €250 per ton. More or less, we think it will, for the first part of this year, remain at this level. It could be a little bit more reduced due to the expectation that the hedge funds will go in and sell their volume of zinc to put the money in other markets. If they do that slowly, let’s say equal tonnage per month, then the LME will remain at the same level. But if they drop their volumes at once on the market then there will be a demand disruption on the LME for zinc, more than we are already facing today. The second part of this year should be better and could be slightly increased back to 2008 price levels.
For instance, if you look at India regarding zinc markets, the small traders have huge problems with zinc markets in India because there is an internal set price in India itself. Some of them are already in bankruptcy. Because in Europe, especially in the Netherlands, we are an exporting country, we have problems exporting zinc at the moment to India, due to the internal struggle within India regarding the zinc. We are highly dependent on the traders who are buying the material from Europe.
Zinc is not the only market being affected by the speculators, as aluminium is also. The expectation with aluminium is that there will also be a slight dip in February and March. For the whole of 2010, people are more positive about aluminium markets. Today the price level and the demand for material are not that high, but the expectation is that before the end of the year, these will be at a normal economic level. Again, it is the hedge funds that are strongly involved in the situation. It’s not stable at this level.
With lead, the global idea is that speculation is also high, similar to zinc. Lead demand, especially in Europe, has been affected by the closing of several European battery producing plants, so there is less demand from the battery producers. Therefore, all the lead recyclers are looking for other sales and this leads to a domestic fight on the market regarding selling ingots. With, the secondary lead ingots, normally you have a premium on these, just as with aluminium and zinc ingots. But the premium on lead ingots dropped drastically and you could even buy ingots without a premium from plants just so they could get rid of their production.
My main shareholder and secondary lead producer in France sold a lot of lead ingots to other markets, not only to the battery manufacturing world, but also to other lead users, such as producers of ballast.
If you look at 2007, each secondary lead producer or primary lead producer could ask any premium because there was so much demand and not that much available. This has completely turned now. There is, for Europe, too much lead and not enough demand. In Asia, in China for instance, they have closed plants due to lead pollution of the children. Russian plants have closed.
In India there is still some demand and what you see is all kinds of people from Europe and America are traveling all around the world to get their ingots sold. It is a complete opposite situation to what we had two years ago.
In summary, during the first part of 2010, there will be a correction of the LME [price] due to the hedge funds that are going to sell their stocks. But for the whole of 2010, we are slightly positive, more than we were about 2009.
Johan van Peperzeel can be contacted at jh@peperzeel.nl.
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NONFERROUS SCRAP>>NORTH AMERICA>>Steve Solomon, Solomon Metal Corp.
In general, it appears that the nonferrous markets are very strong. Although volatile, prices across the board seem to be very strong. Demand seems to be very good for all metals right now, however there is concern with the supply of the scrap metal. We don’t know whether the lack of metal has more to do with a fall-off in industrial production or seasonal factors.
There is a lot of concern in the industry that there will not be enough metal to fill what we are being told will be good demand for scrap going into spring.
The weather in New England is not limiting supply around here, though I believe in other parts of the country it is a factor. The amount of material that may have been coming out of inventory is down. After five or six years of strong prices as well as consolidation within the industry, there are very, very low levels of inventories sitting in scrap dealer yards. There has been a lot more material being sold into the stronger markets over the last several years. What is being generated is really on more of a hand-to-mouth basis.
With the close of the Chinese New Year, we have yet to experience an increase in inquiries for material. However, we do expect that Chinese demand will get much stronger. One issue that many countries exporting to China are dealing with now is increased regulation from the CCIC (China Commodity Inspection Corporation), which is slowing down container availability going to China. It appears there are fewer ships leaving the U.S. for China, making it a bit more difficult to ship large volumes over there.
Activity from India has not yet entered the New England marketplace in a big way. Every once in awhile there are some inquiries but they are not overly competitive at this point.
Domestically, it appears that demand for material is very good. It is certainly better than it has been over the last year and a half. The domestic concern is whether there will be enough material available to meet demand and how aggressively the Chinese will be competing for material and forcing domestic prices higher, both on the aluminum side and for copper products.
Secondary aluminum producers have also been busy. We’re being told that the potential order books for most secondary aluminum producers as well as primary producers seem to be very strong going into the spring.
This is a positive sign. Credit seems to be easier to come by. Payment terms have been improving. The aluminum industry certainly seems a lot healthier than it was one year ago.
The general environment now is that scrap dealers are under pressure to be able to source material. The message from consumers is they will be in the market to buy metal soon.
If there is an uptick in manufacturing and the weather breaks and more obsolete scrap makes its way into the system, it should make for a good second quarter.
Steve Solomon can be contacted at steve@solomonmetal.com.
NONFERROUS SCRAP>>CHINA>>Eric Deng, Ling Tong Metal
In late January and early February, copper continued to plunge sharply in face of the optimistic economic data from United States and China, the two world’s top metal users. That’s partly because many investors started to withdraw funds on worries over the tighter monetary policy by the governments. Moreover, the price is also weighted by a firmer dollar. At the moment of this writing, near the middle of February, the U.S. dollar index had pierced a level of 79 points. The stronger dollar makes the dollar-priced metal more expensive for non-U.S. investors.
High stockpiles are also dragging the price down. On Jan. 29, copper inventories in LME warehouses had risen to a level of 541,050 tonnes, near to the one-year high. According to the data, LME copper closed at its lowest price ($6,750 dollar per ton) since mid-November on that day. Shanghai copper futures also ended at around a level of 55,000 yuan per ton.
Market research indicates that the local copper scrap market is very quiet these days. Most insiders say they think copper may continue to drop in the short term. And Shanghai copper futures may be seeing resistance at around a level of 50,000 yuan/ton.
Even before Jan. 29, copper experienced big corrections in early January, with the price dropping to a level that was very near to $7,200 dollar per ton. Many insiders forecasted that more buyers would be seen if copper could fall below a level of $7,200 dollar per ton. However, the price rallied on Jan. 22 as fund buying gathered after the price dropped to a one-month low tied to potential monetary tightening in China and the proposed U.S. bank regulations. Insiders note that most consumers of copper scrap prefer a wait-and-see attitude at present. Many were also busy with the preparations for the Chinese New Year.
This year, worker shortage is another problem troubling many local copper scrap processing plants. It has been learned that many workers chose to go home earlier this year as they feared the severe winter wave may disrupt transportations as it did in 2008 Many local copper scrap processing plants are trying to keep the workers now, because they believe copper will trend up after the New Year holidays.
“We also worry they (workers) won’t come back. For one, the wage gap around the country is narrowing,” an official from a local scrap processing plant says. “Home is the first choice under such circumstances. For another, only a few people prefer the heavy physical work now since most the youths are reluctant to do so, as many youths now receive advanced education.”
Copper producers are also very prudent in making purchases. First of all, it is still unclear where the short-term copper market is going, from the correction situation. Secondly, the copper market is moving forward to the traditional dull season for sales. Orders are decreasing and so is buying. Finally, producers replenished some stocks in December 2009. If the price doesn’t get corrected further, they will not consider placing large orders.
On Jan. 7, China's central bank surprised markets by raising the interest rate on its three-month bills by four points, a day after it promised to keep credit growth in check. Five days later (Jan. 12), the bank announced again unexpectedly to raise its bank reserve requirements by 0.5% to cool the growth. The China Banking Regulatory Commission (CBRC) also has started to revive the “loan quota” mechanism and will scrutinize commercial banks’ lending pace on a monthly and quarterly basis, according to sources familiar with the matter.
Presently, aluminium is still supported by rising costs and the expectation of recovering demand after China’s New Year holidays. The central government’s No. 1 document said that the government will support house construction in rural areas as an important measure to stimulate domestic consumption. The promise also brings impetus for aluminium prices to run higher in the coming days. According to the data, the present aluminum price is the most valuable among all base metals. In my view, aluminium price at home may continue to trend upward after the holiday unless the government continues to implement new measures to restrict liquidity.
Zinc both at home and abroad experienced significant price corrections at the start of this year, weighted by decreasing investment money flows, the rallying U.S. dollar and softer-than-expected economic data. As of mid-February, local zinc ingot price had dropped by 3,300 yuan per ton, down about 17% from that in early January. The price of zinc on the LME has also plunged by about $475 per ton during this round of corrections. The zinc market continues the weak trend in February after the “Dark January”.
Market research indicates that some local zinc users started to consider making some purchases after the big corrections, and some have already taken action. For one, it is already the end of the Chinese year now. If they don’t replenish stocks now, they will not have the chance to do so in coming days. For another, many the holders are reluctant to do sales at current relatively low prices. If the zinc price is seen as recovering, these holders will turn more persistent in their bidding prices.
Stainless steel material and LME nickel prices saw a short-lived rebound in early February, supported by the unionized workers strike at a Canadian nickel mining operation in Sudbury, Ontario. However, this rise was completely offset later, following a round of deep corrections on such nonferrous metals as copper, aluminum and zinc. The weak nickel greatly soured the buying sentiment in stainless steel scrap market.
From insiders, there are also many other uncertainties preventing the price (stainless steel scrap) from running higher. Firstly, many steel mills are still not active in making purchases because of the government’s series of measures to tighten monetary policy. Will it continue to do so to avoid rising inflation pressures? It is still unclear now.
Secondly, market research indicates that the stainless steel scrap price remains stable in early February, but that stability may not last very long since trades in the market are very low. Finally, many domestic large-sized steel mills prefer ferronickel as the raw material now. For one, the price is more profitable compared with that of stainless steel scrap. For another, the market supplies of ferronickel also are relatively sufficient. That’s to say, the stainless steel scrap market is confronted with stern challenges in the short term.
In my view, the stainless steel scrap market may rise after the Chinese New Year holidays. First of all, the housing sector will be fully under way after the holiday. Demand for metal including stainless steel scrap will rise sharply. As buying starts rallying, so will the price. Second, from our past data in 2006-2008, stainless steel scrap historically starts a round of price rises in February and March. The market could even stay stable in the year of 2009, a year after the global financial hurricane.
Eric Deng of Ling Tong Metal can be contacted at tungshuzhi@hotmail.com.
NONFERROUS SCRAP>>WESTERN EUROPE, ITALY>>Fernando Duranti, Leghe & Metalli
It is as cold as ever in Italy, but the market is even colder. Since last month, there is nothing great to report. Production activity hasn’t been very strong. It is going at a constant rate of between 50 and 60 percent of capacity.
With the red metals, there isn’t much brass scrap available and the volume of brass scrap that is available is all directed for export. Consequently, the domestic brass consumers are not buying it because the export prices are much higher. In mid-February, there was a time period where the availability of brass scrap had completely disappeared.
It disappeared because an unexpected further increase of copper price on the LME. Consequently, people who own scrap are just holding it in stock at the moment to wait for higher prices. The export market is doing quite well and we are exporting a lot, mainly to the Far East, India and China.
However, the domestic industry is not at a standstill. They are producing, but they are only using the rod turnings or swarf because these materials are coming back on the market. The consumers are not paying an extra price as the swarf is going at the same price level as the domestic brass scrap. Consumers prefer to pay for rod brass swarf, which doesn’t go for export, instead of the increased export prices they would face for brass scrap.
Right now, not much copper is being sold as there is not much domestic consumption. Aluminium is doing well. With the fall of zinc prices in mid-February, that material had stopped moving, but it has picked up again because the LME has picked up quite strongly.
With the other nonferrous metals, everything is very quiet except for titanium. We have an abundance of titanium scrap because medical instruments are all made of titanium and there is a lot of scrap coming from there. There is also some titanium coming from the Airbus production units in Italy. At the moment, titanium turnings are even being imported.
The titanium prices have gone up from 20 euro cents per kilo to very close to 2 euro per kilo. I have a partner who is a big titanium scrap and turnings trader and he actually buys a lot of turnings and washes them and cleans them and crushes them. He sells material to companies for titanium production. In fact, a majority of the turnings will end up in the ferrotitanium business and today the ferrotitanium market has reached the $7 per kilo level, between $6.90 to $7 per kilo.
Mind you, at this level there is not a great demand at this level, about 20 to 40 tons at a time.
Exports had been going very well until about mid-February. Then they suddenly stopped. The door shut completely and everybody is holding material or waiting for prices to go up.
Also, in the current market you can’t find any cadmium. Cadmium is in a shortage at the moment. Every single producer of bulk ferroalloys is short of material. It looks as if the market has picked up and they don’t have enough material to supply the market any longer.
It is the same with ferrosilicon as there is very little material available. It is the same with high manganese and the chromes. It looks as if there is a shortage or demand exceeds availability or people are holding material to wait for higher prices. These are all possibilities.
Fernando Duranti can be contacted at fernandoduranti@leghemetalli.it.