Nonferrous

Nonferrous markets continue their downward slide as credit issues and uncertain economic conditions have caused overextended buyers to sit on the sidelines for awhile.

Prices for copper, aluminum, nickel and a bevy of other nonferrous metals are not showing much in the way of an improvement. And, according to a number of speakers at the recently concluded ISRI (Institute of Scrap Recycling Industries Inc.) Commodities Roundtable Forum, markets will likely remain somewhat listless through the rest of this year.

For copper, dealers note that the market will likely remain volatile. One analyst at the ISRI event said that with the market at the present "choppy," no one knew where the market would be during the next several months.

China’s role has complicated the situation. The country has played a significant role in copper’s resurgence throughout the past several years. But during the past month or so, Chinese buyers appear to be sitting out the market, which has caused serious declines in prices. Now, with the U.S. and world economies slowing, the market for copper could continue to be sluggish or soft at best. Prices for primary copper, which had crested at around $4.20 per pound, have been declining, with present figures around the $3.60 level. Further, with greater uncertainty in the market, many analysts say they are expecting to see copper continue to decline in price through the rest of this year, settling in the range of $3 per pound.

Production problems continue to crop up, keeping copper supplies from getting too far ahead of demand. However, there are signals that during the next several quarters larger supplies will be making their way to the market, which could keep a cap on copper prices going forward. Reports as of mid-September indicate that inventory levels have climbed to an 18-month high. According to one report, copper stocks in LME (London Metal Exchange) warehouses stand at 209,800 metric tons, about double the levels seen during this spring.

Although the economy of China, which consumes roughly one-fourth of all the copper produced, is slowing, many experts say that the country’s economic growth will still be far greater than that of any other country.

The strengthening U.S. dollar also is affecting commodity markets. While the cheaper dollar resulted in a surge in export demand, a slightly improved dollar has led to a scaling back of orders, as many overseas consumers are no longer finding bargains.

Aluminum also has been under some pressure lately. During the same ISRI event, one speaker said that quality levels had declined and that as long as credit issues remain a key concern, there likely will not be much in the way of sharp price increases. Industrial production is down, which is causing some slowing of orders for the metal. China also has eased off of its aluminum buying. Primary aluminum production is down by nearly 10 percent, and quite a bit of capacity is presently idled.

Several reports note that aluminum prices have declined by around 20 percent during the past quarter, while inventory levels have climbed by as much as 40 percent. More pessimism continues to flood the aluminum market, as many aluminum smelters, which consume significant amounts of energy, may be forced to close because of escalating energy costs.

Looking toward next year, another industry observer says aluminum prices will likely languish through the rest of 2008 and possibly the first half of next year. Markets could be much stronger during the back half of 2009; however, any improvement is contingent on China becoming more aggressive with its production.