Springtime Bounce

Moving into the spring, nonferrous scrap markets in Europe appear to be holding up fairly well. Despite significant problems with the economies in some of the European Union’s member countries, such as Greece, Spain, Portugal and Italy, many nonferrous metals are either holding at their present levels or are even seeing modest improvements in pricing.

One British scrap metal recycler says, “Nonferrous markets are not too bad. Lots of the metal is going abroad.”

Nonferrous scrap demand in a number of Western European countries is helping to keep the flow of aluminium steady throughout the continent. One European source says orders from France, Germany and the United Kingdom have been coming in at a fairly strong pace.

While demand is healthy, prices are in something of a holding pattern presently, though there are reports that some consumers are increasing the premiums they are paying to their suppliers. According to several reports, premiums have reached from $180 to $190 per tonne at some ports in February, a slight increase in premiums paid during the month of January.

While aluminium scrap prices are holding up fairly well in Europe, there continues to be an overcapacity on the global market. Hydro, a large aluminium producer headquartered in Norway, recently announced that it has cut production at several of its facilities in response to the oversupply situation. The company says it plans to cut aluminium production at its Kurri Kurri smelter in Australia by 60,000 tonnes and has reduced output at its Neuss plant in Germany from 230,000 tonnes to 50,000 tonnes.

The move by Hydro and other European aluminium producers to cut production may be one of the factors creating a more optimistic outlook for the metal.

According to sources contacted for this report, many of the debt problems on the continent have been built into prices for aluminium scrap. Additionally, the European Union’s economy is showing signs of stabilising, which could be contributing to the moderately improved outlook for aluminium scrap. Also helping the situation, European banks have been injecting money into the economies of European countries, according to sources.
 

Copper scrap, however, has a murkier outlook compared with aluminium. Several scrap recyclers say European consumers have not purchased much copper scrap, leaving China and other Asian consumers as the major end markets for the material. One U.K.-based scrap metal recycler adds that Germany and Spain in particular have not been playing much of a factor in the copper market over the first quarter of 2012.

Despite this murky outlook for copper scrap, there are reports of pockets of strength in the European Union. According to The Financial Times, premiums for copper in Rotterdam increased sharply from the start of the year to $70 to $80 per tonne.

Aurubis, one of the largest copper scrap consumers in Europe, says price volatility is likely to remain an issue.

During the company’s annual meeting, Chief Executive Peter Willbrandt said, “While we assess the ongoing high copper prices as volatile, they ought to stay at the same level overall. Because of this, the availability of other raw materials important for Aurubis—blister copper and other recycling materials—will be at a good level. We expect sufficient refining charges for these materials as well.”

Willbrandt added that the European market, which is second in copper demand after Asia, affected as it is by debt and financial crisis, has cooled somewhat.

However, German companies maintain a positive outlook and economic growth in China likely will continue at least until the change in political leadership in autumn 2012.

“For us, this means that we can assume a continued high level of concentrate processing and a cathode output at the same high prior-year level. We expect that the Lünen (Germany) recycling facilities will also be fully utilized,” Willbrandt added.

China’s future role in the copper scrap market is an area of interest. One exporter says he is seeing longer-term issues that could affect the direction of copper scrap into China.

“There are lots of structural changes happening in China,” the exporter says. “How will they value their currency? How will they go through their inspection process? What will their regulatory direction be?”

Despite the uncertainty, China has been a strong force during the first few months of 2012, driving copper prices to the $4-per-pound level.

Despite the surge in buying, there are reports indicating China is purchasing more copper than it can use and is inventorying material.

A recent report by The Wall Street Journal notes that copper inventories in China have nearly doubled during the past five months.

Concern also is mounting regarding the theft of copper from containers that are shipped to southern ports in China. One source says he has had between 400 to 500 pounds of copper stolen from several containers, which has cost his company thousands of dollars with little recourse.

Several other companies also have reported significant theft of copper from containers at Chinese ports. (See the news item “BIR Surveys Members About Container Theft,” on page 16 of this issue.)

In other markets, an exporter notes that customs officials in Indonesia are holding containers that government officials claim are full of hazardous material. This is the second time in 2012 that Indonesian enforcement agencies have set aside containers of recyclables that were deemed to be carrying hazardous material.

The exporter says that Indonesian customs officials have been holding some containers for close to a year, claiming paperwork problems with shipments.

According to local press reports, the Indonesian Environment Ministry, the Customs Office and the police have been inspecting more than 100 containers that contain recyclables that may include hazardous waste.

An AFP news report from mid-March relates an incident where containers documented as containing “scrap metal” were inspected by Indonesian agencies and subsequently shipped back to the United Kingdom.

The report says the containers instead held “1,800 tonnes of waste [that included] liquid and illegal mixed waste.”

Inspectors in Jakarta conducted a spot check in January reportedly found “asphalt, sand, plastics and oozing white liquid.”