Nonferrous Scrap: China

This year Christmas and Chinese New Year are only 20 days apart. Usually before Christmas, suppliers won’t produce any inventory and then right before Chinese New Year, everything is going to stop for two weeks. In between here and there, the supply side is going to slow down and from a demand side and market side. They are not taking in as much as they want to. We are caught in between the whole month of December and January. There will be some slowing down. The demand is there but it is not where it was before 2008, and also the real fear is if the euro keeps on falling apart, the LME price will make an adjustment. If the dollar gets strong, although we are not really as good as people think we are, compared to the Eurozone, we are still stronger than the euro. This could trigger another fallback of LME, and that would affect Shanghai and the COMEX. That is a big fear. I think overall, basically this year, 2011 is over. After Chinese New Year, it might start back aggressively toward the middle or end of February. This is for all grades of metals.

The low demand and low supply means the market will keep a balance. We have seen copper prices jump up the last two days. (Nov. 30 and Dec. 1). The secondary market has not experienced the same percentage of increment as we have seen on the LME or COMEX. It is that more consumers are coming out and buying. I think that what they have seen is the slowing down of inflow.

Material is coming out, but is still not really in big quantities. We can negotiate a price every minute, but as for the financial situation, there is no negotiation. You are either dealing with a customer with money, or you are waiting 30-45 days later to get paid. It is a judgment call. I think most people would rather sell to a guaranteed payment. After 2008, we have seen less and less newcomers to the market.

I can see that especially from China, this is a very common practice in the banking industry where before the Chinese New Year they will hold back on commercial loans. All the loans will have to be paid back. People may be short on cash.

I think before the Chinese New Year, probably nothing will change. The hiking of COMEX and LME concerns me. It doesn’t seem like there is any good news in the market. There is no good demand or new projects taking place. The Indian market seems to be very, very quiet.

David Chiao, Uni-All Group Ltd. can be contacted at uniall@yahoo.com.