The following is excerpted from a quarterly report produced by the Bureau of International Recycling. Titled BIR World Mirror, the report touches on the outlook for a host of non-ferrous metals from the perspective of BIR members in different continents. This is the second installment of a multi-part report. The first installment was posted Thursday, Jan. 31. You can read it here.
Reporting of snow in the Middle East, after long years, is not part of the whether forecast. As a matter of fact, it is a forecast on how bad the economy is and probably will continue to be!
When it became cold enough to snow, off ran the "bull", and in came the "bear". The last quarter of 2001 was just an introduction to a probably long sluggish economy 2002. Despite cut-down on productions in major copper and aluminum producers around the globe, demand is still lagging behind. The only markets where we can bring material are India and South Korea. They seem to be the only markets that are “awake.” This may not be their own choice, but between the so-called "double dip" situation in the United States, and the situation on the European markets with serious production cut-backs in the automotive industries, growing unemployment etc., it adds up to the gloomy market situation in the Middle East.
All secondary aluminum smelters are suffering. Some have shut down, others have been working on less than 30 percent capacity. Primary aluminum producers seem to be the only surviving aluminum related industries in the Middle East. Companies such as ALBA are planning to increase their production substantially within the following 3 years. Salam Sharif, Sharif Metals, United Arab Emirates
UK Nonferrous Showing Positive Signs
The run-up to Christmas demonstrated that any recovery was far from being underway for the non-ferrous markets.
Copper in the period before Christmas saw discounts widen with consuming works experiencing reduced orders for their finished product, as LME copper attempted to rise.
Return to business in January saw LME prices drop well below pre-Christmas levels in the first week. As a result, copper discounts narrowed by approx. to quickly widen the following week as LME copper returned to December's highs.
The physical aluminum market in December looked poised for a rise last month as reduced capacity and credit limits in the UK market forced merchants to look overseas for better levels. This inevitably created additional competition among merchants and in turn tightness for the consumers. With January's arrival commercial grades of aluminum (taint/tabor, tense etc.) have started to increase in price. High-grade aluminum items seemed cheap in relation to the market and December was a good opportunity to buy quantity at attractive discounts in preparation for predicted narrowing discounts in 2002.
The return to work in the New Year was met by tighter discounts on high-grade aluminum items. Brass prices remained stable in December through speculative merchant buying. With hindsight this appeared to be shrewd forward purchases for January as China's interest is starting to return. With low freight rates, scrap prices have risen by around 10 percent.
Glencore's announcement to refurbish one of their lead plants resulting in its closure for 18 months seemed the only justification for lead's sustained rally over $500.
Lead scrap discounts widened immediately resulting in sale prices remaining unchanged despite the rise, handing the advantage to the short sellers with unfixed positions. Nickel made significant progress, rising 10-15 percent between December and the first half of January 2002 and as a result stainless steel prices have risen by about 10 percent. Zinc also rose by around 8-10 percent during the same period.
Hopefully, the traditional New Year optimism will add some prolonged consistency and predictability to a frustrating marketplace for all non-ferrous metals. Michael Oppenheimer, Mountstar Metal Corporation
Part III of the report will be on line Monday, Feb. 4.
For more information on BIR go to their web site www.BIR.org.