Nonferrous Scrap, Italy

There has been some activity in the nonferrous market and it looks as if there is more demand for scrap than there is availability of scrap to cover all of the demand. There is a big shortage in brass scrap. There is demand for copper scrap, but not by the big refineries in Europe. They are still at a standstill on deliveries until the beginning of April. They have stayed away from buying and machining. They probably finished all their 2010 contacts for deliveries within January and February and then stopped their incoming material. They are starting again in April and copper starts moving up again. It’s gradually losing ground on a day-to-day basis. That is what is happening on brass scrap, including brass swarf or brass turnings.

Copper is coming in from abroad. I wouldn’t say it trickles in, but there is some good quantity. Prices have moved down so there has been less material put on the market. Suppliers are hoping for better prices to come in one or two weeks’ time. Chinese competition at the moment is very close to zero. Their prices are on the same level as the Italian/European prices or maybe only $50-$100 higher. I understand the Indians have raised their prices by €100-€200 at the most above what European prices were for bronze scrap. Some of it was going to India, but India is always a scary country to do business in because after you get your first installment of a payment of 10-20%, the balance is always a mystery. You sell to traders and these traders confirm that the balance of the payment will be done by  when the buyer receives the container in his works, but you never know where that is exactly. So consequently it may take some time before you get your balance. Hardly anyone can risk waiting for a container that is unloaded in India and delivered inland to whatever destination the final buyer is located. People ask for finance of the payment from bank to bank and it is very hard to obtain [that] from Indian buyers.

Aluminium is still quite in demand but not as great as it was two or three weeks ago. It has slowed down a little bit, but that doesn’t mean there isn’t any demand. Secondary ingots produced out of scrap are regularly moving. Their prices go up or down depending on LME prices. I have a feeling that the die-casting industry is doing well and production is quite strong. I understand some scrap has been bought from the United States. Consequently, this is a good sign of how great the demand is on the aluminium side. If we have to go over to the United States to buy scrap, this will compensate the shortage of scrap generated in Europe. I think it is starting a good relationship and people are convinced you get quality material from the U.S. and you get a good supply of probably the best alloys.

And of course there are moments when there is an actual shortage of scrap at least at the moment because the industry hasn’t been producing 100%. It has done probably about 60% to 70%, consequently there’s at least a 30% shortage of scrap being put on the market because of the lower rate of production. This being the case, if demand rises and the industry doesn’t compensate with more scrap, obviously there is a shortage and normally you go to the U.S., which is the only market that can supply Italy with good quality scrap.

2010 was a substantially good year as a start-up year. Production is gradually moving up, but it hasn’t gone up to 100% capacity. It has probably gone up to 70%-80% so there could possibly still be a shortage of 20%-25% in regular production. Obviously an increase in the demand might heavily exceed the lower percentage that is in production.

Fernando Duranti can be contacted at fernandoduranti@leghemetalli.it