Market Report: Nonferrous Metals

Nonferrous Scrap>>North America >> Steve Solomon, Solomon Metal Corp.

The rise in the metal prices through the end of August has not fully stretched into the actual physical markets at this point. As of the beginning of September, it does not appear the physical markets have caught up yet with what seems to be happening in the terminal markets.

Demand has not changed much. The export markets right now still have not fully developed back to where they were. We are hopeful going forward that the strength in the metal markets will move into demand for scrap.

There’s a lot of scrap that came out of the system when the prices rose in the spring. Copper got up to around $3.50 plus per pound in April. A lot of material that was excess to the market came out then. And since spring into the summer at least, the industrial base in the U.S. has still been off historical levels. There has not been extra generation of scrap. Demolition and construction is improving, but it is still not completely back in gear at this point. Until that happens, there still will be difficulty in generating large quantities of nonferrous scrap.

Recently, a report came out of China saying that manufacturing looks to be strong in China going forward into the next quarter. And if that is the case and the report is accurate, then China will need material. It is going to affect its demand for scrap. Right now, the prices are weak relative to the market, and demand is not as robust as it has been in the past.

Domestic brass and bronze ingot makers are buying on a more limited basis. I think they are buying from their regular suppliers on a regular basis, but pricing is not keeping up with LME prices. Prices are very stable. China’s purchasing of red brass and radiators forced them to at least move their prices up. But they are saying demand on their end is not nearly as strong as what the market seems to be. Right now, we have very strong copper prices and very strong tin prices. It should make for strong prices for the ingot makers, but because they are only buying limited quantities, they can pretty much buy at relatively conservative prices.

The aerospace business seems to be very good. The stainless end of the business has been spotty, and I think most major stainless processors are buying on a month to month basis as they have orders to fill.

On the aluminum side, it is the same situation. It is really no different of the other nonferrous metals. The demand is stable at best. There are very few aluminum consumers that are out there buying all they can get. They are buying on a very limited basis from their regular suppliers, and pricing has been conservative relative to the markets.

I would say these are times of which if you have consistent relationships with your consumers, it is a very good thing because if you don’t, it is much more difficult to move large quantities of metal.

The markets are strong. Volume is not as good now as far as material into scrap yard as it was back in the second quarter. The third quarter is a wild card at this point. If the U.S. economy strengthens and money frees up in the banking system allowing construction projects back online, and if the economy heats up not just in the United States, but in the rest of the world, you are going to see it is going to kick the supply of metal back into gear. If the markets hold, that will mean some good times in the scrap business for the balance of 2010.

Steve Solomon can be contacted at steve@solomonmetal.com.

Nonferrous Scrap>>South and Central America >> Jim Diamond, CNA Metals Miami Inc.

They are generating about the same rate they have been for the past two or three quarters. We haven’t seen great slowdowns over the entire region. If anything we are seeing more scrap coming out of the Central America. The only questionable country in my opinion that continues to is the governmental interference in Venezuela. That seems to be getting more… There are major power shutdowns by the Venezuelan government which is inhibiting production of aluminum and the ripple effect of that is felt towards the whole metal industry in Venezuela. Domestic consumption of scrap materials in other countries such as Columbia, Ecuador and Chile is increasing. Their exports are a little bit harder to come by because of the domestic consumption.

I think that the Brazilian economy is strong. Production has increased in the automotive sector. The automotive sector is increasing from a year or two ago. Brazil is in times of trouble.   A lot of export of high end material, primary grades, increased import lower grades.. continues to crawl along …

Well I think the big issue right now that we are facing is the decreasing demand by the Asian countries for red metals and some of the aluminum. That’s tightening up pretty hard over the last three weeks and the outlook for the fourth quarter is not good. So that will create in my opinion an oversupply of scrap metal coming out of the region. So right now, a pretty large percentage of that is going to quarries and if that backs up like we think it’s going to, it’s going to create some issues, Where’s it all going to go, looking into the pricing. At the same time the commodity market is strong. We’ve got $360 copper and we’ve got $4300, $2400 aluminum so the contradiction in supply and demand and the price is dramatic right now. It is dramatic to say the least. That is creating a lot of problems for us.

Jim Diamond can be contacted at jdiamond@cnagroup.com.

Nonferrous Scrap>>Western Europe, Italy>>Fernando Duranti, Leghe & Metalli

The situation at the moment is the prices in China are weaker than domestic markets so consequently all the scrap is staying in domestic markets for the time being. There is a big difference in what they are quoting today–over €130 difference between lower Chinese prices and domestic prices. Domestic people are paying the correct price, and the Chinese are paying lower prices for all the problems they have internally. So consequently, there hasn’t been a container leaving for the Far East since probably the middle of July.

Everything for the time being is staying domestic. While they are staying domestic, the domestic market is very slow in production. Domestic people are relying mainly on their brass turnings and brass swarf. Because it is the same alloy which is now getting stricter and stricter on the lead content. Most of them are working for the U.S. market so consequently they have to ship very low lead material into the states as well as the European Union is getting stricter on the lead content. So they rely mainly on their brass swarf to get back from their own customers to whom they sell rod. I know of one important rod manufacturer who stopped buying rod scrap because she said it’s too contaminated, too high in iron and lead. They’re relying mainly on their swarf or turnings. Also they haven’t got that big volume of production. They’re lower in volumes so I think they are self sufficient with the swarf they get back from their own customers. If they buy, they buy pure rod scrap. They pay €200 euro a ton more or they buy 70/30 label which is the same alloy. They are concentrating on these items at the moment.

Aluminum is going very strong. There is very little scrap available. The secondary industry is doing very well despite the fact that car sales are about 28 percent lower than what they were two or three months ago. There is a lot of demand for secondary ingot. Prices are very strong on the secondary probably because car makers are building new models. Secondary zinc was going strong until about a couple of weeks ago, now it’s going down. I have a very meager notion of lead scrap. That is probably starting now to recover because of the batteries before winter. The high temp alloys are going strong because of the price of nickel. Having kept its level even at moments when prices on the LME were weaker. It did lose something but it didn’t lose as much as copper and other metals and it is keeping up its strong levels. The aircraft industry is moving well too, so consequently all the high temp alloys for the aircraft engines are being mass produced so there is a lot of demand for secondary alloys.

Fernando Duranti can be contacted at fernandoduranti@leghemetalli.it.