Nonferrous

“Fifteen years ago, 90% of our red metal sales were to American consumers. Today, close to 50% of what we ship goes to foreign countries,” remarked Robert Stein of Louis Padnos Iron & Metal Co., Holland, Mich.

Stein referred to his company’s Midwest location when noting, “We’re about as geographically dislocated from some of the consumers to whom we ship as possible.”

The increased importance of China, in particular, as a destination has changed the way processors handle their copper scrap, says Stein. “We clean a much smaller percentage of our brasses than we have done historically. It’s simply put in containers and sent to China for cleaning and further processing,” he commented, adding that “labor costs are as much as 30 times more expensive [in the U.S.] than in the countries to where our material is destined.”

The growth of the Chinese market has been coupled with the disappearance of U.S. secondary copper smelting. Almost every such smelter has closed due to a combination of environmental concerns and their inability to compete with foreign competitors.

“China, I believe will in the future be the major force in establishing values for more and more grades of scrap generated in the U.S., as demand for consumer goods in its domestic markets and its ability to more efficiently apply finished product technology and quality improvements increases,” said Stein. Stein also predicted that India would become a more prominent importer of scrap copper over the next several years.

Leanne M. Baker, an analyst with Solomon Smith Barney’s San Francisco office, said the overall global copper market will be affected by the slowing U.S. economy. She called current conditions a “bumpy landing for copper demand,” with copper demand being affected by several factors, including slower computer and telecom spending (and thus wire and cable) and the observation that “China appears to be taking a breather” from its incredible copper demand growth pace.

While the current market involves some recovery from the giddy technology spending of the last several years, Baker said, “our view toward the metal is neutral, though I’m turning a bit positive toward it starting with 2002.”

Baker also noted the new prominence of China in today’s copper market. “China has surpassed Japan as the number two consumer of copper [both primary and secondary] in the world, and import demand growth approached 45% in 2000,” she said.

Martin Squires of Carr Futures, London, said copper pricing will remain depressed for the next several months. “Carr Metals remains a copper bear and foresees a depressed metal price throughout the second and third quarters of this year.”

Sustained low pricing could soon affect the copper scrap market, Squires noted. “Scrap supplies are price sensitive, and discounts adjust accordingly. Therefore, with primary metal prices increasingly under pressure, Carr Metals expects the quantities of available and affordable scrap to contract, leading to a switch to primary as opposed to scrap in certain sectors.”